Consumer Rights (EUC Report)

EU Committee Report: EU Consumer Rights Directive: getting it right

Motion to Take Note

Moved By Baroness Howarth of Breckland
	To move that this House takes note of the Report of the European Union Committee on EU Consumer Rights Directive: getting it right (18th Report, HL Paper 126).

Baroness Howarth of Breckland: My Lords, the Commission's proposal for a consumer rights directive, published just over a year ago, on 8 October 2008, marked the culmination of the review of existing consumer law known as the "consumer acquis". The aim of the review was to simplify and complete the existing regulatory framework, providing a real business-to-consumer internal market.
	Sub-Committee G of the House of Lords EU Select Committee examined the proposal and had a number of aims. First, we sought to establish whether witnesses accepted the Commission's justification for the legislation. Secondly, we considered whether full harmonisation would be likely to deliver the desired result. Thirdly, we examined some of the specific policy proposals with a view to assessing their viability. Finally, we sought to highlight some of the issues and tensions that might be considered by decision makers in the months to come.
	The Commission had identified a fragmented regulatory framework across the EU, which it said had resulted from the minimum harmonisation basis of the current directives, meaning that the member states could go beyond the minimum level of protection set down by the directives. This, it considered, has given rise to several barriers to cross-border trade, such as high compliance costs for businesses and a lack of consumer confidence in purchasing across borders. It is the Commission's hope that these problems can be addressed through this proposal and that an increase in cross-border trade will be secured as a result.
	While we as a committee agreed that there is a need for action, we considered that the Government should withhold agreement from the proposal as drafted. We remain unconvinced that in its current form it will deliver the desired boost to trade across borders. We are also concerned that it may reduce the overall level of protection currently afforded to consumers. We as a committee are committed to following the progress of this proposal through to a satisfactory conclusion, one that is beneficial both to businesses and to consumers.
	During the inquiry we heard from many interested parties and received a wealth of evidence. We spoke not only with the Minister, Gareth Thomas, but also with the European Commissioner for Consumer Affairs, Commissioner Kuneva, as well as representatives from business, consumer organisations and, on a visit to Brussels, several member states. We hope that our report is well timed to influence the UK and EU-level approach to this dossier as the discussions and negotiations progress. We are pleased to be having this debate while consideration of the proposal in Brussels is still at its early stage.
	We have recently received the Government's response to our report and were happy to note that they are largely in accord with what we had to say. In particular, we appreciated the level of detail in the response, and the approach of taking each one of our conclusions in turn has been extremely helpful to us in our scrutiny of this proposal.
	A particularly strong concern of the Government, echoing that of the committee and many UK witnesses, was about the potential loss of the UK right to reject under the directive. The Government consider that the retention of this right should be secured by including it in the main text of the directive, in line with the committee's recommendation that these concerns be addressed through an amendment to Article 26 of the directive, perhaps giving a specific time-limited right to reject, such as the 30 days proposed by the Law Commission.
	Following the Commission's response to our report, in which it states that it would support the insertion of a provision in the proposal unequivocally confirming that the UK could retain its right to reject, I should like to ask the Minister whether this would satisfy the UK Government. While we would be pleased to see the retention of this right for the UK, we are concerned that maintaining different rights for different member states will undermine the aim of the proposal to reduce the fragmentation of the regulatory framework and to complete the business-to-consumer internal market. We would like to see the higher level of protection being made to all member states, as was voiced by some of them in a conference on this topic that I attended in Brussels
	One of the committee's main recommendations in relation to the consumer rights proposal was that further progress should await a more complete impact assessment by the Commission. We recommended that this might usefully include a full analysis of existing consumer protection in all 27 member states; the problems encountered; the differences between the proposal, the existing minimum harmonisation directives and national provisions; better statistics on cross-border trade; and possible interaction with the common frame of reference for contract law. We are pleased that the Commission has now come forward with a comparative table demonstrating the relationship between the directive and current legislation across member states, and an accompanying note of clarification, which is available on its website. However, there needs to be further discussion of the points raised and we will follow this with interest. We would still like to see better statistics on cross-border trade and reiterate our recommendation that the Commission come forward with this information.
	We are pleased to note that the Government share our concern about the introduction of a two-year limit on trader liability for faulty goods. As we highlighted in our report, this could be problematic in relation to the purchase of a range of goods which could reasonably be expected to last longer than two years, such as cars and boilers. We note that the Government are negotiating in the council working group to find a solution which protects the interests of UK consumers, an approach which we endorse, though we stress the importance of the fact that changes to the directive are in the best interests of consumers throughout the EU, not just in the UK.
	One of our recommendations in relation to the directive was that its scope should be extended to cover digital products which are currently excluded from the draft. It is our view that if it is to be truly future-proof, this proposal must pick up these issues. The specific issues pertaining to the digital era must be addressed in some way. In their response, the Government reported that while they had suggested such an amendment in negotiations they think it unlikely that the scope will be extended in this way. It is clear from further submissions we have received from businesses that this is a complex area, but we are pleased to note that the Commission has recently extended a tender to examine this area and to extend the principles of consumer protection rules that are available for more traditional goods and services.
	Similarly, another of our suggestions with regard to scope—namely that it should extend to contracts for pure services and the service aspects of mixed contracts—is thought unlikely to feature in any revised draft of the directive. Mixed contracts, which contain both goods and services, were of concern to many of our witnesses, who gave examples of mobile phones and the installation of kitchens. Mr Harrie Temmink, a member of the Commissioner's cabinet, recognised that mixed agreements were one of the issues where the directive may need some clarification. We would like to ask the Minister whether there will be any further attempts to secure changes to the scope of the directive along these lines, and how these issues will be addressed if they are not covered by the proposal. They are obviously one of the highest areas of concern for consumers.
	In our report we recognised the concerns of the financial services industry about the application of this directive to the sector. I note that the Government have taken up that point in their response, stating that they wish to see financial services fully excluded from the scope of Chapter 3 on distance and off-premises selling, though they support the application of Chapter 5 on unfair contract terms to financial services. Other members of the committee will be following up some of these questions on scope, contract issues and information later in the debate.
	While the Government were supportive of much that we had to say, they did not agree with the committee's conclusions and recommendations in total, and it is to some of these points that I will now turn. In our report, we highlighted the existence of other barriers to cross-border trade, apart from the fragmentation of the regulatory framework, and questioned the extent to which the proposal will be able to achieve an increase in cross-border trade without first addressing these points. For example, we consider that language, culture, distance of delivery and the handling of cross-border complaints may also be responsible for the current levels of cross-border retail trade and therefore warrant consideration in the context of the proposal. While the Government agree that divergence in consumer laws across the EU is not the only factor affecting cross-border trade, they do not say whether they are in agreement that other factors should be considered by the Commission. I would therefore like to press the Minister on this point.
	Full harmonisation remains the Government's preferred approach to the directive, whereas we concluded that full harmonisation as proposed by the Commission is likely to be politically impossible for member states and the European Parliament to support. Having detected little enthusiasm to abandon the full harmonisation principle entirely, we suggested that a "differentiated harmonisation" model may be workable, harmonising aspects such as definitions, the right of withdrawal and the provision of information but allowing member states room for manoeuvre in other areas. In our view, such flexibility could facilitate swift responses to future challenges. We would be interested to hear from the Minister whether the Government are confident that the adoption of a full harmonisation approach will not lead to a reduction in rights for consumers and whether they think it will afford member states sufficient flexibility for responding to future challenges.
	During the course of our inquiry, substantial concern was expressed about the use of delegated legislative powers—a procedure known as comitology—to amend the lists on unfair contract terms. It was felt that the process could be opaque, excluding stakeholders, and even member states, from considering the full implications of proposals. Like the Commission, we consider that this process ought to be given a chance to prove itself as it could be a more efficient method of taking these decisions than a full legislative procedure. However, we note that the Government are concerned about whether the use of the comitology procedure is appropriate and their suggestion that it can be used to make amendments to non-essential elements of a directive. Here, I would like strongly to reiterate the committee's view that the legitimacy of the procedure will be totally dependent on a commitment to full transparency by the Commission and by national Governments, which should include consultation as appropriate. We would appreciate an update from the Minister on the Government's position on the use of comitology for the purpose of updating the lists of unfair contract terms.
	We are encouraged by the Government's optimism that the negotiation process on this proposal will result in a "much improved directive" that will protect consumers without placing undue burdens on business. We will continue to follow up progress on this proposal to ensure as best we can that this is the case. While we agree that there is a need to update the existing directives, not least because of inconsistencies between them over key definitions and the fragmentation of the business-to-consumer internal market that has resulted from their minimum harmonisation basis, we believe that there is a considerable amount of work still to be done before the draft directive will achieve the aims set out by the Commission, and the expectations of the committee, of giving value to consumers. I beg to move.

Lord Borrie: My Lords, I congratulate the noble Baroness, Lady Howarth, on the excellence and clarity of her presentation this morning and on chairing the sub-committee in its work over many months. I am largely in agreement with what she said about the objectives of the consumer rights directive. To replace four directives with one and to update, simplify, clarify and improve consumer rights across the European Union would be welcome. How far the aims are achievable, of course, is another matter, as the noble Baroness indicated. The committee concludes that, at the very least, there is a need to remove the confusion of inconsistencies between the existing directives over key definitions. That the same word or phrase should mean different things in different directives is highly inconvenient.
	The committee has rightly echoed concerns voiced by a number of witnesses that, in some instances, the directive as it stands may,
	"reduce the overall level of protection currently afforded to consumers".
	The committee is surely right to say that the Government should withhold agreement from the directive as currently drafted.
	I have been involved with consumer law and improving the rights of consumers for 40 years, particularly during my period as director-general of fair trading from the 1970s to the 1990s. The starting point for reformers in those times was the failure of English common law to recognise that, typically, there was an inequality in bargaining power between the seller and buyer and that the consumer was in need of non-excludable statutory rights to goods of reasonable quality that were fit for their purpose. We in this country broadly achieved those objectives in the 1970s and the years immediately after. As the European Economic Community and then the EU developed, there was a range of reform initiatives, some of them continuing to come from national Governments and others, particularly combating unfair contract terms, coming from the Commission of the European Union.
	Unfortunately, as the noble Baroness indicated, one outcome of the present directive, if it were to become law, would be to take away some consumer rights that UK consumers have against the trader. The right to reject faulty goods, provided that the rejection is exercised in a reasonably timely fashion, has existed in our law for more than a century. The directive removes it. The familiar limitation period within which any court action must be commenced has been reduced from six years to two. I declare an interest as honorary vice-president of the Trading Standards Institute. The institute asks why a supplier of double glazing would produce products that could last for 15 years if it knows that liability will exist only for two years. There are other concerns about reduced rights for consumers that the committee has painstakingly set out in its report.
	One basic ground on which the committee considers that the Government should withhold agreement to the proposal is that the committee is not convinced that the proposal will deliver the desired boost to trade across national frontiers. I realise that what I am about to say may be more controversial than other things that I have mentioned. Enthusiasts for full harmonisation—I hope that this does not include Her Majesty's Government—have an unrealistic ambition that a UK consumer should be able to go anywhere in the European Union and shop with as much assurance that their rights will be upheld as if they had bought in their own high street.
	However, if for any reason a purchase were unsatisfactory, even if one's substantive legal rights were happily harmonised across the European Union, the practicalities of pursuing a legal action against a foreign trader make the transaction much more hazardous than one in one's own high street. Even if your claim for compensation is modest enough for you to use the new and useful European small claims court, enforcement of any judgment will be problematic. My advice to noble Lords, and to consumers in the UK generally, is that if you want goods that originate abroad, rather than buying them yourself, buy them through the filter of a UK retailer. That may be the wiser course.
	I recall from my time as a member of the EU Committee a few years ago the benefit obtained from the memoranda of outside organisations and academics. I am delighted that specialists such as Professor Geraint Howells continue to act as advisers to the committee and that others give freely of their time to write. One such academic, writing fairly concisely and thereby probably ensuring a bigger readership than some others who produce evidence to committees, is Professor James Nehf of the Indiana University School of Law. He pointed out that consumer protection laws in the United States have traditionally varied from state to state: they are a state rather than a federal matter. That has resulted in a healthy degree of experimentation, with measures being introduced in one state and others seeing how it goes and then copying or not. There has been a general convergence over time, but consumer protection laws have originated in state laws. Professor Nehf says that differences between state consumer laws have created few obstacles to cross-border transactions in the United States, where experience suggests that full harmonisation in the EU is "neither necessary nor desirable".

Baroness Wilcox: My Lords, I thank the noble Baroness, Lady Howarth, and the members of European Union Sub-Committee G, for their excellent report. It brings to mind the times when I served on Select Committees. I enjoyed it very much and thought that it was some of the best work that is done in this House, quietly and unsung, especially because so little European legislation is scrutinised by another place. Without reports such as this, so much legislation would go through on the nod; we would find ourselves in a bigger mess if we in this House simply accepted what they wanted to do. So I thank the noble Baroness very much for what she has done for the whole country in this report. It is not only directed at your Lordships who are here to speak today about the work that she has done with her committee in bringing this very readable report to us all; it also has to be remembered that it is very nice for consumers to be able to understand what they are reading and I commend the fact that the report has been written in plain English.
	I follow the noble Lord, Lord Borrie, and of course I agree with just about every word that he said. He has given us a masterclass in consumer law, and so he should—after all, he was the director-general of the Office of Fair Trading. When I chaired the National Consumer Council, I ran to him every five minutes to make sure that what I was doing was going to be okay. I am thrilled that I am speaking after and not before him in case I say something that he thinks is wrong. He has outlined the things that are wrong with the otherwise very good idea of total harmonisation.
	I look forward to listening to the noble Lord, Lord Whitty, who is speaking after me. Again, I should have preferred him to speak before me so that I could at least have criticised something that he said. He was chairman of the National Consumer Council, as was I, and he has now transformed it into a huge organisation called Consumer Focus. When I chaired the National Consumer Council, all the countries of the European Union waited for the policy papers that came out of the NCC and they used them as the bedrock for their own consumer ideas and laws. I hope that that will continue and that we do not step back from the best and finish up at the lowest level, which is often what happens if you try to harmonise everything.
	The National Consumer Federation, of which I am the president, Which? magazine and all the other consumer organisations that have encouraged me to stand up and speak today are all very concerned. They are particularly worried about the number of step-backs for the UK consumer. This country has the best consumer rights and laws. No other country in the European Union comes anywhere near us. Some of their consumer bodies even include trade union movements so that jobs can be protected. However, this has nothing to do with jobs; it is all to do with the relationship between the trader and the consumer. We are not talking about like for like here. These are not the bodies that we know; they are a very different group.
	What we worry about most in relation to step-backs is, for example, the loss of the primary right to reject faulty goods, which is covered in the report, and the six-year limit for claiming for faulty goods, which the directive would cut to two years. These are the sorts of areas about which consumer groups are worried and that is why I am speaking in this debate.
	I shall finish by referring to paragraph 39 in the report, which I particularly support and for which I am very grateful. It says that the committee considers,
	"that the Government should withhold agreement from the proposal as drafted. We recommend that further progress on the Directive should await a more complete Impact Assessment. We believe that this could usefully include: a full analysis of existing consumer protection in all 27 Member States".
	That is very important because, once you look at what is available, you see that we are not looking at like for like and that to harmonise with some of those countries would be absolute suicide for us as consumers. I thank the committee very much for the report.

Lord Kirkwood of Kirkhope: My Lords, it is a signal pleasure to follow the noble Baroness, Lady Wilcox, and I absolutely agreed with her when she said at the start of her remarks that the work of Select Committees is very important. I am still a new boy on Sub-Committee G but I find it the most fulfilling part of the week under the steady and wise leadership given genuinely by the noble Baroness, Lady Howarth. The committee works very well and there is a range of experience. You learn a lot and it changes your views on life.
	This is the committee's third report and, again, I pay tribute to the noble Baroness, Lady Howarth. We have covered cross-border care and organ donation, and this is the third significant piece of work. It looks at the changes in gestation which have dramatic effects on ordinary people. The frustration is that no one pays any attention to these things at all. I am sure that this will be a very productive debate but I am also sure that it will be totally ignored by the press, which is intent on fomenting frenzy in the general population across all manner of celebrity-type fronts. However, when it comes to whether there is an automatic right to reject consumer goods that are non-conformable to contract, they are not interested, and that is very disappointing. We can only try harder and I am very pleased to be part of this debate.
	I think that there should be a question mark in the report's title so that it reads "getting it right?". That is the burden of my remarks. We had some very good consideration from the Government and some feedback from Europe. That is all positive but it does not satisfy me that the job is done yet, so I want to keep hold of that question mark. As a committee, we are keeping it under scrutiny, which I am absolutely sure is the right thing to do.
	The analysis is very easy to support. I do not think that anyone would be against looking at simplification of the current set of rules. The current consumer acquis is not fit for purpose, to repeat a much overused phrase. There is no doubt that there is always a question about the European Union competence and whether there is an impingement under subsidiarity. However, I do not think that anyone can complain: this is the internal market and so it is intrinsically part of the Commission's work. Therefore, the competence is unquestionable.
	The goal of increased trade is commendable but I agree with the noble Lord, Lord Borrie, who captured the point rather well. Why on earth would anyone want to do their shopping in Romania when they could go to the high street? Competent retailers, which we all have, seem to be the answer. We think that there is a cross-border flow of trade of something like 6 per cent. That is good and I hope that the figure improves in the not too distant future. However, the question that we need to ask is: at what cost? Again, the noble Lord, Lord Borrie, made an interesting point. I also noticed from the report Professor Nehf's very interesting evidence about how the United States handles this issue in not dissimilar circumstances. The two environments are not in point entirely but I think that we can draw on the American experience in taking this whole argument forward.
	This all threw me back to my early days when I was studying to become a Scots lawyer. I was reminded of Donoghue v Stevenson and snails coming out of bottles.

Noble Lords: Hear, hear!

Lord Kirkwood of Kirkhope: I can tell who the lawyers are in the House. Indeed, although this is not my opinion, there are some Scots lawyers who think that there are still things coming out of bottles in cafes in Paisley that are dangerous to consumers. I repeat that that is not my view; I think that Paisley is a really nice place.
	I looked at the articles and I believe that the argument has moved on, with the Government and the Commission taking it further forward. However, Article 1 uses the word "approximation". There are always translational issues involved in Europe, and Article 1 drew me up short because the question that we are trying to wrestle with is: how do you approximate consumer protection across 27 nation states? It is not easy.
	You do not need to look much beyond Article 5 in the draft directive to see that there are information burdens, particularly for low-value goods. There is a long list of items for which evidence needs to be provided before they pass the test of the directive, and small businesses in particular might find that very onerous.
	The key point under Article 26, to which the chairman of the committee referred, concerns the loss of the automatic right of rejection of goods that do not conform to contract. That is true in Scots law, where there would be a material breach. In passing, it occurs to me that the directive does not conflict with anything in Scots law, which has its own body of contract law. I should just like an assurance from the Minister, but perhaps not this morning if the information is not readily available, that there is nothing north of the border that we need to worry about that is different from some of the terms of the article.
	As the noble Baroness, Lady Howarth, said, the Law Commission has raised some important objections about loss of existing rights and obscurity of terms. It made a very good point, which is referred to in Article 26. Article 38 refers to unfair terms: black-list items and grey-list items. I do not think the black-list items are any cause for concern because they are, by definition, terms of a contract which would be unfair. On the Annex 2 items we have had evidence from lawyers suggesting that it is simply not possible to determine whether an Annex 2 unfair term is actually unfair unless you look not only at the contract but also at the terms surrounding it and at any other contracts that affect it. In my view, as a simple former provincial Scottish solicitor, it is generically impossible under Annex 2 to claim that Annex 2 is helpful in defining unfair terms.
	I absolutely concur with the view of my chairman that comitology is a matter of concern. I was more concerned about this than my other colleagues so I will be watching it with an even sharper eagle eye. I think it is a device. It can cut corners and it can be useful if it is used with a great deal of responsibility. The transparency and the consultation that surround it are essential; otherwise, people will lose confidence in the system as constituted.
	Article 42 is the article which worried me the most. I do not think that there is a legal base for inserting penalties into our civil contract law. I do not see it. There are some really worrying sections in Article 42. This is a matter for legal brains that are more developed than mine in this area. I also agree with the noble Lord, Lord Borrie, that we were very lucky to have our special adviser, Geraint Howells, who is an expert in the area. He speaks in English despite being Welsh and he speaks English in a way that I understand, which is even better. We need to look at some of these detailed articles more fully as we continue to hold this under scrutiny.
	There is a real danger that existing protection could be lost in this harmonisation operation, as I think Citizens Advice has said to us. I absolutely concur with colleagues who said earlier that there is a lack of a proper research base or impact assessment. The noble Baroness, Lady Wilcox, made the point that there is not a powerful foundation on which to base some of these changes. There is a need to balance and to keep the consumer at the heart of this. Politically, it is impossible for the Government to disregard existing rights and give them away in any casual way. I am sure that the Government would not want to do that but it might happen by accident. You never know when you go into negotiations at the European Commission what the outcome will be.
	For me, paragraphs 170 to 173 of Chapter 7—I am looking at the Government Front Bench—are key. They are about sales contracts and what we need to do for minimum protection in that area before we can be confident that this job is being properly done.
	There is obviously a long way to go in this argument. We have had evidence that there is some flexibility and some negotiating capacity within the argument that will probably unfold over the next year or year and a half. It is very, very important that we get this right and that we do not give away the game and surrender rights which have been established, as the noble Lord, Lord Borrie, said, for centuries in the negotiation which is about to proceed. I return to the title of the report and I hope that the Government take the time to get it right.

Lord Whitty: My Lords, as the noble Baroness, Lady Wilcox, has trailed me, I had better start by declaring that I am chair of Consumer Focus. I congratulate the noble Baroness, Lady Howarth, and her committee on the perceptiveness of the report because it closely mirrors the views of the directive not only of my own organisation but also of other British-based consumer organisations and the European consumer organisations, all of which strongly support the line taken in the committee's report that, in its present form, this is not the appropriate way in which to enhance consumer rights and to lessen business costs. I say that because I am aware of what the Commissioner told the committee and has told the institutions of Europe. Indeed, I have had discussions with her myself. Her aims are quite correct.
	We need to review the present regime; we need greater clarity for consumers; we need greater consistency across borders for businesses; and we need to make it easier to operate across borders for those people. However, I also agree with the committee that the differential regulatory framework in 27 countries is not the main reason why people do not shop across borders. There are not only issues of culture, language, access and consumer preference, but also business behaviour. Not only are there significant barriers to small businesses trading across borders, and certainly across more than one border, but there are very large, transnational firms which operate on a European scale and beyond whose marketing tends to be fragmented. They have franchising and distribution networks, which in this digital age ought to give us global access, but if you try to buy insurance in Spain because you believe it is cheaper you are bunged back—whatever the technical term is—into the British website. Some business practices are a greater inhibition to cross-border trade than the regulatory framework.
	Nevertheless, a good objective is to aim for better consistency and the aims of the Commissioner were undoubtedly correct. Unfortunately, this directive does not meet those objectives, largely because of the way it has come about. It is more a cobbling together of four existing directives, all which have their merits and demerits and, even in the form in which they are put in this overall draft directive, there is no consistency of coverage. Some cover services and some do not; some cover financial services and some do not; no consistency of rights is provided; and there is no consistency of remedy and redress between the various areas. The Commission has attempted to make it more consistent but it is still inconsistent between the four pre-existing pillars. The whole aim is to make it easier and to clarify and it does not do that. My conclusion from a study of this is that it makes life less easy for consumers and less easy for business to operate across frontiers.
	I am not exactly of the same mind as my predecessor, the noble Baroness, Lady Wilcox, as regards her attitude to harmonisation in general. I think a degree of harmonisation would be useful here. I am not even ideologically opposed to full harmonisation. The problem with full harmonisation in this context is that it is put at far too low a level. Maximisation will actually reduce the consumer rights of citizens within this country and in a number of other countries across the EU. There may be a role for full harmonisation of definitions and therefore partial harmonisation might be possible. In general, I do not think that this is the appropriate approach.
	Clearly, the focus of consumers more generally in Britain is concerned with the loss of long-standing rights, such as the right to reject, as the noble Lord, Lord Kirkwood, has just said. There is also the reduction from six years to two years for remedy in many areas of goods which exists in this country and issues such as the right to a refund of money rather than having to accept a repair. Many noble Lords will have seen the evidence from Which?, pointing out that that is particularly acute with cars that go wrong. Do you really want it repaired when one thing has gone wrong and your confidence in the total machine has been seriously shattered? You need to get your money back.
	I would probably be even harsher on the references to the proposed unfair contract terms and the role of the British national regulators in that area needs to be preserved. There are dangers that it would be undermined. I also agree with the committee that putting some of this down to comitology, as the noble Lord, Lord Kirkwood, said, is not a reassurance that this will all come right on the night. If the basic legislation is unclear, it is unlikely that comitology will make it a lot clearer.
	Another dimension that is not clearly in the draft directive is any adaptation to the digital age. It is mentioned in one or two places, but a lot of consumer access is delivered through the digital world. That must be particularly true when people are at a large distance from the actual provider, but the draft directive does not reflect digital rights and provisions right across the economy. We also agree that the impact assessment and the basic research behind it need to be improved.
	My conclusion is that this is a huge missed opportunity. The Commission rightly saw that there was a job to be done. It worked hard to try to do it, but it started from the wrong place. Instead of producing a consistent framework and then adapting the four existing directives into it, it started from the basis of the four different directives. That has led to some of the inconsistencies and possible dangers that the noble Lord, Lord Kirkwood, described. I very much regret that the Commission's good intentions have been drafted in that way. I doubt very much whether that is a matter for negotiation. It is not a matter of tweaking the structure of the directive; nor is it a matter of negotiating UK opt-outs to preserve the right to reject. There are bits in here that can be preserved but in effect we need to start again. When the new Commission comes in, if it is, as I hope, concerned to improve citizen and consumer rights and to ease the course of business across the EU, it ought to rethink the whole project. The report of the noble Baroness and her committee gives it good grounds so to do.
	I know that some of our concerns in this House and in the consumer movement in the UK are shared across other countries within the European Union. Consumer interests and business costs in the long run would be much better served were we effectively to start again. I hope that the Commission, the Council of Ministers and the Parliament will ensure that that is the case, whatever process needs to be gone through to bring that about.

Baroness Hooper: My Lords, some years ago, as a Member of the European Parliament, in the first directly elected Parliament, I was vice-chairman of the Committee on Public Health, Consumer Protection and Environment. That was in the days when the doorstep selling directive was mistakenly thought by some people in this country to be a direct attack on our daily pint of milk delivery on the doorstep, when it was in fact about giving people the chance to change their minds about hire purchase agreements or other financial commitments made to doorstep sellers of financial services—a very necessary consumer right. Many other myths abounded at the time due to the perception that the European Union, or the European Community, as it was then known, was encroaching on our national and sovereign rights and ways of doing things. Even in those days, the House of Lords Select Committee reports were very well regarded and well used not only by British MEPs but by MEPs of other nationalities.
	Today, it is with relief that we now have before us a well researched and clear report on the current Commission proposals. I am glad to see from the list of witnesses that at least two Members of the European Parliament were witnesses to the committee, but I am sorry that there do not appear to have been any MEPs from other member states to give their views. Nevertheless, I welcome the ongoing policy dialogue between the Select Committee and the Government, of which this debate forms part, and between the Select Committee and the Commission. That certainly did not happen in my days in the European Parliament.
	The present proposals to update and improve the fair application of consumer protection throughout the now much enlarged European Union are well timed, although it is perfectly true that their scope may be a little too great. For the same reasons, Sub-Committee G's report is well timed. Considerable regard will be paid to the work that has been put into the report. I congratulate the noble Baroness, Lady Howarth, not only on her committee's report but on her clear and detailed presentation of it this morning, which, in a way, leaves very little for the rest of us to add. Although I am not a member of Sub-Committee G, I am a member of Sub-Committee A of the European Union Select Committee.
	I have listened with great interest to the various well-informed contributions to the debate and, as I said, feel that I can add little. Like others, I want to record that I welcome the general objective of the proposals before us but, again like others, I have doubts about the possibility of full harmonisation. I hope that the Government will look into the committee's suggestion to differentiate harmonisation. I look forward to hearing the Minister's answer on that proposal, which was put so well by the noble Baroness, Lady Howarth.
	I am also concerned that the Commission's proposals do not take into account the impact of new technology in our lives. I cite as an example digital products. I understand that there is some doubt as to whether the directive would adequately deal with the complexities of the digital age. By their very nature, those products are of a very different kind to those of a more tangible quality and are subject to intellectual property rights. May not the digital era require even more far reaching reform than that proposed in the report? This is yet another area where, hopefully, time is on our side. I am also concerned that, as my noble friend Lady Wilcox and others pointed out, the current level of protection should not be reduced. If, as the noble Lord, Lord Kirkwood, thinks, the press will ignore the report—I certainly hope that they do not—that will be very disappointing, but the important thing at this stage is that the Commission takes note.
	I fully support the approach that, as proposals are at an early stage, there is ample time to get it right.

Lord Lyell: My Lords—

Baroness Farrington of Ribbleton: My Lords, we should hear first from the noble Baroness, Lady Young, and then the noble Lord.

Baroness Young of Hornsey: My Lords, first, I thank my noble friend Lady Howarth for securing the debate and for her able and patient chairing of and guidance on what is, at least for me, a very complex EU directive. The noble Lord, Lord Kirkwood, said that he wanted to add a question mark after the words "Getting it right"; I had thought of putting three dots, to signify that it is ongoing and that, if we ever get it right, we will be lucky.
	I shall address two key issues that came up during the course of the scrutiny process: first, the scope of the directive; and, secondly, the information available to the consumer and its clarity. As with a number of other matters that arose from discussion of the directive, there were various views on what its scope should be. After due consideration of the many concerns that were expressed by several different witnesses and in the written submissions, we felt that the scope could be expanded in a number of ways. We recommend, for example, that the inclusion of other directives, such as the package travel directive within the scope of the consumer rights directive, should be reviewed after the extended impact assessment, which we recommend takes place before the Government agree the proposal as currently drafted.
	There was a good deal of agreement on extending the scope of the directive to include digital products; the noble Lord, Lord Whitty, and the noble Baroness, Lady Hooper, have already commented on that. The issue of digital products is very important, and I will spend a little time talking about it. Article 2 of the proposal defines goods as any "tangible, movable item"; thus, digital goods bought over the internet would be included in the proposals, but similar items downloaded directly on to a computer would not be covered. That is very confusing for most consumers.
	There was support for an extension of the scope of the proposals even from those who were positive overall about the directive. The British Retail Consortium, for example, expressed strong support for the directive and believed the scope to be satisfactory, but it agrees with the principle of extending the scope to include digital goods provided that it is acknowledged that the remedies for the sale of other types of goods would not necessarily work for digital products. Developing appropriate measures for digital goods in this context will not be easy.
	While Consumer Focus, Which?, the OFT, and the EU consumer body umbrella organisation, the BEUC, all felt strongly that digital goods should be covered by the directive, not everyone who submitted evidence supported their inclusion. This was partly due to the difficulty arising from the difference between tangible and non-tangible goods. In its written submission, the CBI argued that digital goods were,
	"different in nature and ... subject to intellectual property rights".
	I suggest, however, that this distinction might elude the consumer, who has protection when buying a music CD but not when legally downloading music from the internet; so the inclusion or otherwise of digital products indicates how difficult it is to design instruments that keep pace with present-day situations, let alone with what may arise in the future. It is hard to see how the aim of the directive to future-proof consumer law can be achieved if it cannot engage effectively with today's realities.
	I spent a little time on the scope of the proposals because it was one of the biggest concerns expressed in many of the submissions that we heard and read; "wide", "unclear" and "very confusing" were some of the terms used to describe the directive. Certainly, many consumers would feel quite bewildered by what is and is not covered by the proposal. Indeed, many of the witnesses and written submissions acknowledged that the clarity of information for consumers and traders was a difficulty when trading in one's home country, let alone across borders with the potential for language and cultural barriers to be added to the mix. Given the complexities, apparent anomalies and gaps, we will need to work very hard indeed to ensure that, as far as possible, consumers are given the correct amount of information at the right stage of the transaction. As might be expected, the directive itself is not written in accessible language for everyday consumers, but that is not necessarily a problem unless lawyers and those tasked with interpreting and distilling the meaning of the proposals lacked clarity about its provisions. The OFT observed that a directive that was clear and capable of being explained to consumers should be the main goal.
	Other key concerns expressed include the possibility of information overload for the consumer, a lack of guidance for traders about how to display and arrange the information for the consumer, possible deterrents to the trader due to the volume and nature of the information, and the consequences of not providing the information. Although we were not convinced by the argument that consumers might suffer from information overload as a result of the directive, we do feel that it is essential for the directive to be legally robust and clear for those who are charged with explaining its provisions to consumers.
	In labelling this a consumer rights directive, the aim should be that consumers have a full range of protective measures under the law. Of course there needs to be a sensible balance so that traders are not unnecessarily hampered by excessive regulation and consumer push-back but, after close examination of the draft directive and of the evidence from witnesses, we feel that it is important to stress that consumers need clarity. It is no good having rights if you cannot work out what they are or what is meant by them. This is particularly important in the context of this debate. As we have already said, we came to the critical conclusion that the overall level of protection currently offered to consumers should not be reduced.

Lord Lyell: My Lords, may I apologise humbly to the chairman of the committee in that I put my name down very late? May I also apologise to the noble Baroness who has just spoken, although no doubt she and other noble Lords will be delighted to hear that I shall be brief? The noble Baroness who has just spoken has made most of the points that I would wish to have made.
	It was 32 years ago when I sat where my noble friend Lord Hunt is sitting now and had to lead for the Opposition on the Unfair Contract Terms Bill, which became the Unfair Contract Terms Act 1977. I recall with considerable humility that one was among really eminent lawyers, such as former Lord Chancellors; about four of them spoke. It was relatively simple in those days. The first element that I remember was removing what was known as the small print. The two categories of people concerned were very much the trader, in perhaps white goods or motor cars, and the consumer. No longer could the trader say to the consumer, "It's in the small print", if things went wrong. I hope that I have got some of that right. That seemed to the basis of the 1977 Act, and it seems to have worked quite well.
	The noble Lord, Lord Borrie, made, if I might humbly say so, a five-star speech that probed a little further. He pointed out the great risks involved in getting right the consumer legislation across borders. Since I was in any way involved in this in 1977, the list of commodities and things that can be traded has increased. Indeed, one of your Lordships spoke about mobile phones and how one can buy and use them. The problem of looking for and enforcing a right across borders in that aspect is particularly difficult.
	I was particularly grateful to see in the report by the noble Baroness, Lady Howarth, what she called the black and the grey lists. Chapter 8 of the report was particularly relevant to any of the things that I might have wanted to say today. Paragraph 181 beautifully put the point about patients wishing to try as yet unproven medicines—I hesitate to call them drugs. Similarly, paragraph 186, on insurance, also merited further consideration, as I think has been suggested both by the noble Lord, Lord Borrie, and indeed the noble Baroness in her report. I was very pleased to see this reiterated in paragraph 194 and in paragraph 195, which stressed national safeguards.
	Finally, I was really delighted to hear from the noble Lord, Lord Kirkwood, about the case of Donoghue v Stevenson in 1932. He might be an eminent lawyer, but I am only a humble member of the Institute of Chartered Accountants of Scotland. However, part of my legal training was to take into account fitness for purpose. I seem to recall that that case rested on—if I may say this to your Lordships this early in the morning—a decomposed snail in a bottle of stone ginger. I do not think that this tincture is widely available in the Refreshment Department in your Lordships' House, but never mind. The case is still quoted and still of particular relevance in Scotland. Indeed, the noble Lord, Lord Kirkwood, pointed out Scots law as far as it is applied throughout the United Kingdom. What he had to say makes the committee and your Lordships think of what might happen across the borders in Europe and the Community.
	I am particularly grateful to your Lordships and, above all, to the noble Baroness, Lady Howarth, for her report and for allowing me to speak, and I look forward to hearing what the Minister has to say.

Lord Razzall: My Lords, I am sure that I speak for everyone in your Lordships' House in thanking the noble Baroness and her committee not only for the quality of this report but also for the fact that they clearly have total unanimity on all sides of the House regarding their conclusion—mind you, we have not heard what the Minister has to say. The fundamental conclusion that,
	"the Government should withhold agreement from the proposal as drafted"
	also seems to have had unanimous support from all sides of the House.
	From my point of view, the two reasons set out in paragraphs 41 and 42 are persuasive. First, I share the view of the committee that, by itself, the action proposed by the Commission—that is, harmonisation of consumer law across the EU—will not necessarily boost cross-border retail trade as the Commission desires. Secondly, and most fundamentally, the committee says that it is,
	"of utmost importance that the overall level of protection afforded to consumers should not be reduced"—
	a point touched on by a number of speakers. The overarching concern is that that could happen if harmonisation went through in the proposed form.
	The noble Baroness, Lady Wilcox, said she thought that we had the best structure of consumer protection in the European Union and I am sure that the noble Lord, Lord Whitty, would agree. I entirely agree that that is the case, but I do not think that we should be complacent about this. One of my fundamental concerns about moving to harmonisation is that a number of people have argued for some time that we need to improve consumer protection rights in the United Kingdom.
	My noble friend Lord Kirkwood said that one of the problems with these reports is that they get buried and no one takes any notice of them. Clearly, there is an element of truth in that and one of the reasons is that the arguments are always put in rather dry terms. In the time available to me, I will indicate in practical terms what I mean by saying that there are areas in which we need to improve our consumer protection rights.
	For example, not many people in this Chamber will have called any of the helpline numbers at the Department for Work and Pensions. If they did, they will have discovered that they cost 40 pence per minute from a mobile phone. A lot of people do not have BT landlines and have only a mobile phone, so they have to use their mobile when they need to contact the DWP. I do not think that many of your Lordships earn £67.75 a week in incapacity benefit, but if anyone does and they have discovered a mistake in their payment, when phoning the DWP they could find themselves being charged £24 for the privilege of determining the anomaly in their payment.
	I am sure that many of your Lordships have had to wait in for the gas man to visit, a satellite dish to be installed, furniture to be delivered or a boiler to be fixed. You would have been told that the man might come in the morning, the afternoon or that he will certainly come at some time during that day. That is particularly difficult when a person is on low income or has inflexible working hours.
	I am sure that all your Lordships have picked up a pack of sausages and seen that they are labelled "British". The expectation will be that they contain pork from pigs which have been raised on British farms. In fact, the meat could come from anywhere and still be labelled "British" as long as it was processed in the UK. Shoppers are often prepared to pay more for meat because they think that it is British, but quite often it will only have been processed here.
	When people receive their energy bill from the electricity company, there are thousands of tariffs and all kinds of claims and counterclaims by the energy companies. Unless people are prepared to spend half a day on the internet, it is often impossible to discover exactly what is happening with their energy bill. I will not even go into bank clearing and the fact that your money leaves your account on day 1 and is not received by the person to whom you have paid it for several days.
	While we could strongly argue that consumer protection in this country is better than in most of our European competitors and partners, there still needs to be a great improvement before we can agree to significant harmonisation with other member states. From these Benches, we would do three things. We think that the Government should introduce a new universal service code, which would be mandatory in the public sector and would provide a benchmark for the private sector. We would—no one has touched on this—introduce a general duty to trade fairly, which would be enforceable by individuals as a private right, as well as by the relevant authorities in case of infringement. We would take out of the empire of the noble Lord, Lord Mandelson, the responsibility for consumer affairs. We would call on the Government to appoint a Minister with responsibility for consumer affairs in the Cabinet Office, with the right to attend the Cabinet.
	We welcome this report. We are glad of the unanimity, subject to what the Minister has to say. But before we move further down the harmonisation route, we need further protection of consumer interest in the UK.

Lord Hunt of Wirral: My Lords, first, I draw attention to my interests as set out in the register; in particular I am a partner in the national commercial law firm Beachcroft LLP. This has been a marvellous debate with some outstanding contributions. I always enjoy listening to the noble Lord, Lord Borrie, but I particularly appreciated hearing others refer to his contribution. My noble friend Lord Lyell said that he made a five-star speech and my noble friend Lady Wilcox referred to his masterclass in consumer law. I have never heard so many plaudits. For me, the most interesting part of his speech was the fascinating comparison with the United States, the trade between states and the different systems, which is something for us to think about.
	Before I deal with the outstandingly clear speech of the noble Baroness, I should like to say to the noble Lord, Lord Kirkwood, that he must not get cynical. I am very worried about him. When he says that the media will bypass this debate, has he forgotten that this is a televised debate and that the periodicals will scrutinise all that we have said? Is he aware that our website gets millions of hits? There is a fascinating interest in this area. I do not think that his pessimism will be borne out. I certainly hope not.
	I was also thrilled with the notable contribution from my noble friend Lady Wilcox. This has been a debate in which the Minister has a lot to answer. So far there has been a general feeling of unanimity across the House. I have a horrible feeling that it may not continue in his contribution and I urge him to throw away the script that he has been given.
	I thank the noble Baroness, Lady Howarth, and the other members of the committee for producing this thoughtful report, which is aptly named Getting It Right. That has been the focus of debate. As is ever the case with these reports, some of the Government's responses to the various recommendations of the committee are more constructive and positive than others. I certainly look forward to hearing more from the Minister about why he does not agree, for example, with the committee's recommendation, which is supported by many speakers, to pursue differentiated harmonisation, which would allow greater flexibility and potentially much more effective compliance, rather than full harmonisation. I would also be interested to hear more about the ongoing negotiations on this draft directive.
	I was a little disillusioned by the noble Lord, Lord Whitty, when he said that it is a missed opportunity and that it is time to start again, and heartened by my noble friend Lady Hooper when she said that there is ample time. I suppose that those of us who have had experience know about that. I remember fondly that I was assisted by my noble friend when between 1992 and 1997 she chaired a committee about the rights of consumers. We had the Citizen's Charter, and I had the honour to be the Citizen's Charter Minister. The noble Lord, Lord Razzall, referred to helplines, and my mind went back to when we had the cones hotline—no, it wasn't me. The Minister at the time said that the telephone number to ring was to be that of the general exchange for the Department for Transport. Hundreds of journalists rang the number only to be told by the operators that they did not know what on earth they were talking about. Our memories are crowded with those sorts of pitfalls.
	I was pleased to hear that Ministers are confident that the right to reject will be retained, but I wonder whether the Minister can give us some more reassurances about the other proposed improvements he expects to be successful. Just as important is that he explains what steps he will take to protect the UK's consumer rights regime should any of his valiant efforts to make improvements fail. The concerns raised, in particular by the noble Baroness, Lady Young of Hornsey, about the bewilderment of people faced with what is proposed and the weakening of the UK regime, have rightly been at the core of this debate, and I hope that the Minister has fully absorbed the committee's recommendations in this area. Presumably, Ministers have no desire to see the current balance of rights between UK businesses and consumers being eroded. If full harmonisation does take place, how will they be able to prevent that occurring? As the saying goes, "If you touch it, you change it". Is the policy one of harmonisation followed by gold-plating? If it is, the approach has had, to put it politely, a somewhat chequered history. All laws and regulations have some unintended and unforeseen consequences, but when we are dealing with measures as wide-ranging as these, we must be especially on our guard.
	Valid concerns have also been raised about the possible unintended consequences arising from this directive especially for financial services. There appears to be a certain amount of confusion about whether beneficial services such as auto-enrolment into pension schemes with an opt-out will continue to survive. Although I am sure the Minister is going to tell us that this problem has been identified and addressed, that is not the same as seeing the practices protected on the ground. Robust measures must be in place and Ministers should share their plans with us and allow them to be subjected to scrutiny.
	It is clear on reading the report and the other various responses to the directive that even where it is benign or beneficial, it does not achieve all that it is supposedly intended to achieve. The responses to the department's consultation raised the concern that much more could be done to simplify the EU-wide consumer rights regime and consumer sales law. This, as we have heard, is particularly true for digital products, a sector particularly suited to cross-border trade, by the way. Most directives have elements of inbuilt obsolescence, but no more so than in this area because the world changes so rapidly. When one looks at the speed of change over the past few years, one can hardly imagine what things are going to be like over the next few years. This directive has got to come to terms with the digital world rather than exclude it. As the noble Lord, Lord Whitty, said, it is a very different world. The reluctance of the Commission risks making this particular draft directive out of date even before it is implemented, and I am not sure that the Government are doing anything to improve matters. A White Paper setting out the intention to review does not inspire one to believe that the necessary steps will be taken soon.
	One area in which the Government can and most certainly should make a difference to UK consumers is in the matter of guidance and information provision. Any simplification of regulation in this directive will have effect only if it is readily and fully understood. I think that the department must take great care to explain precisely what rights and responsibilities will remain, particularly if a harmonised rights regime leads directly, as many noble Lords have expressed in this debate, to an improvement in cross-border trade. What benefit will the directive have if it fails to enhance consumers' understanding of their rights abroad? We have had several discussions on that topic. How will businesses be encouraged to market their products in other countries if they are not confident about the nature of the regulatory regime under which they will be selling?
	Concerns about clear information were not limited to the quality of the guidance produced by the Government. In the report the noble Baroness highlights deep concerns about the quality of the analysis which underpins this directive. The Government's responses were a little superficial about the costs and the analysis, and the way in which procedures have been followed. I understand that the Commission is undertaking further work on these proposals, but there is no indication of what effect any future analysis will have on the negotiations and the final shape of the directive. I hope that the Minister is going to reassure us that the ongoing work is a meaningful exercise, not merely an attempt to provide a justification for decisions already made.
	A true single market for Europe was always an integral part of the founding vision that so many of us shared, but as my noble friend Lady Wilcox has always told me, free trade must also be fair trade. If the noble Lord, Lord Razzall, can produce a clear definition of "fair trade" we will make a lot of progress in the direction that he wants us to go. Competition pursued on the basis of undercutting consumer protection is certainly not fair competition, and effective regulation must be targeted, proportionate and, in this case, should promote trade and not inhibit it. As my noble friend Lady Wilcox said, paragraph 39 of the report is particularly relevant. The whole report is brilliantly written, but paragraph 39 says that,
	"we consider that the Government should withhold agreement from the proposal as drafted. We recommend that further progress on the directive should await a more complete impact assessment. We believe this could usefully include"—
	how much I agree with this—
	"a full analysis of existing consumer protection in all 27 Member States; the problems encountered; the differences between the proposal, the existing minimum harmonisation Directives and national provisions; better statistics on cross-border trade; and possible interaction with the Common Frame of Reference for contract law".
	How true that all is, and I can hardly wait to hear the Minister's response.
	No one wants to see us trapped in a regulatory and legislative logjam, but we need to have transparency and accountability. As several noble Lords have mentioned, the comitology system within the European Union is somewhat controversial; I had quite a lengthy conversation with my noble friend Lord Inglewood, who is out of the country and sadly cannot be with us today, about this whole subject. Comitology has its merits, but transparency must be maintained. I thought also that paragraph 196 was absolutely spot on,
	"we consider that this process ought to be given a chance to prove itself as it could be a more efficient method of taking these decisions than a full legislative procedure. Its legitimacy will be dependent on a commitment to full transparency by the Commission and by national governments, which should include consultation as appropriate".
	I do hope the Minister agrees with that.
	In conclusion, my overall summary is that I can offer only qualified support for the draft directive. There is a great deal of work still to be done at both EU and national levels before I can feel confident that international trade and consumer rights will both benefit. I look forward to the Minister's response to the numerous questions and doubts expressed from both this Bench and by Members on all sides of the House who have spoken today. Again I thank the noble Baroness for introducing such an important debate.

Lord Young of Norwood Green: My Lords, I thank the noble Baroness, Lady Howarth, profusely for her introductory contribution and the committee for a truly excellent report. I enter the debate with some trepidation. There is always a worry in the back of my mind that there are at least one or two people in the Chamber who know 10 times more than I do. On this occasion, there is a galaxy of people who know a hell of a lot more than I do.
	I was fascinated by the suggestion of the noble Lord, Lord Kirkwood, that a question mark should be added to the title of the report and by that of the noble Baroness, Lady Young, who would prefer three dots. Perhaps if we put underneath it "Caveat emptor"—let the buyer beware—that would be good, general, all-round advice whatever happens to harmonisation, full, none at all or differentiated. There was not quite unanimity among noble Lords. My noble friend Lord Borrie suggested that there should be 51 variations on a theme, as per the USA, and my noble friend Lord Whitty wanted us to start again. I am not sure whether that is quite unanimity, but I shall endeavour to address a number of points. I do not know whether I can address all the points made in an excellent and wide-ranging debate, but if I cannot we will communicate in writing.
	The committee drew on evidence from stakeholders in both the UK and other member states to produce a thorough and in-depth analysis of the complex issues that the directive raises, including seeking the views of representatives of other Governments. The findings will be of great assistance to the Government as negotiations continue. I mean that genuinely; I think that they are well written, with a great deal of clarity, which is very important.
	Noble Lords will be pleased to know that the Government are in agreement with the committee on the vast majority of points. I cannot go quite as far as to follow the advice offered by the noble Lord, Lord Hunt, who suggested that I should throw away my speech and start again, because I do not think I would be capable of dealing with this complex issue without it. We agree that the directive could bring benefits to both consumers and traders but I underline the fact that certain aspects need to be improved.
	This is the correct time to be introducing these changes. There have been substantial developments in the market since the four existing directives were adopted—for example, the massive increase in internet sales and the rise of online auctions—and, in order to capitalise on the potential of the internet to boost cross-border trade and provide consumers with greater choice, it is necessary to update the rules to reflect these changes. Full harmonisation of consumer rules has the potential to ensure that consumers will benefit from knowing that, wherever they shop in the EU, the same consumer protections will apply. Making it easier for businesses to sell to consumers in other countries will improve the functioning of the internal market and benefit consumers by giving them access to greater choice and lower prices. Businesses that trade cross-border or are considering doing so in the future will similarly benefit from harmonisation of rules.
	The existing divergence of rules creates considerable compliance costs for businesses that sell to consumers in other member states. Despite their best intentions, businesses—particularly small and medium-size enterprises—can find it difficult and expensive to be certain that they are complying with the plethora of consumer provisions that exist across the EU.
	Of course, as the committee's report acknowledges, divergent consumer laws are not the only impediment to increasing cross-border sales. Differences in language, taxation rules and the cost of delivering goods to other countries are also important points, as a number of noble Lords said. But these are not reasons for not tackling the barriers created by fragmentation of consumer rules. The European Commission is undertaking work separately from this directive to tackle some of the other barriers to business-to-consumer cross-border trade. For example, it is engaged in work to consider how consumers can have better access to redress mechanisms in other member states. Yesterday, the Commission published a communication on cross-border e-commerce, which considers how to encourage levels of cross-border online shopping and looks at a number of issues such as cross-border enforcement, payment systems and copyright issues, as well as fragmentation of consumer rules.
	However, while the UK strongly supports the objectives of the directive as a simplification and better regulation measure, it is vital that the internal market objectives are not pursued at the expense of important consumer protection. It is clearly a universal concern of the House that we should not get a lowest common denominator effect where consumer protection is diminished. We must work to achieve a directive that provides a high level of consumer protection as well as boosting the internal market. We share the committee's concerns that the Commission's proposal for the directive does not adequately achieve these dual objectives; indeed, there is a serious risk that the directive may result in the loss of key consumer protections, both in the UK and in other member states.
	I am also concerned that the scope of the directive and its interaction with national contract law and other Community legislation is not sufficiently clear. I am particularly concerned about the potential loss of the UK right to reject faulty goods, the reduction in the period of trader liability and the potential loss of consumer protection in the area of financial services. These points were addressed by a number of noble Lords and it will only be in the interests of time and trying to cover as much as I can if I do not single them out individually.
	I say in response to the question from the noble Baroness, Lady Howarth, that the Government's view is that it is essential that the right to reject faulty goods for a short period is retained. That is a cornerstone of the UK protection regime and is understood and highly valued by consumers. Although we have received assurances from the Commission that we can retain this right in general contract law, we do not regard this as a satisfactory solution. It will not achieve the aims of harmonisation or simplification and is likely to be confusing for both traders and consumers. We are therefore working with the Commission and other member states to secure an amendment to the directive to provide a fully harmonised, time-limited right to reject which will be available to consumers across the EU. I am pleased to say that we are making progress on this issue. We are also working with other member states to ensure that longer liability and limitation periods will be provided by the directive. Two years is simply not enough in relation to certain goods and services.
	The noble Baroness, Lady Young, expressed her concern about future-proofing in relation to digital products, services, mixed goods and services contracts. The Government have made it clear that we would like to see these issues covered throughout the directive, including Chapter 4, which provides consumers with rights when things go wrong. Unfortunately, it now seems unlikely that the scope of the directive will be expanded in this way. That is disappointing, but we are pleased that the European Commission is looking at the area of digital products, although its conclusions will not come in time for action through this directive. The UK Government have committed to ensuring that our domestic laws provide adequate and appropriate protections for consumers when they purchase digital products. It is our intention to do this through a consumer rights Bill which will also simplify our existing consumer protection rules on unsatisfactory service provision. We hope that our work will inform the Commission's thinking on these important issues.
	I now turn to the comitology procedure—I thought that this had something to do with astrology before I encountered the directive, but I now know how much in error I would have been—which has exercised a number of noble Lords. The Commission proposes that the procedure should be used to update and amend the list of banned and grey contract terms. The Government have concerns about whether the use of the comitology procedure is appropriate given the importance of these lists. Although the procedure would provide a degree of flexibility to respond to contractual terms that raise the issue of unfairness, there is also a clear risk that it could be opaque and may not adequately take account of the views of national Governments and stakeholders. We know that other member states share the concern expressed in the committee's report.
	We are aware of the strong concerns about the adequacy of the Commission's impact assessment—a number of noble Lords referred to it. Like the noble Baroness, Lady Howarth, the Government are pleased that the Commission has recently produced a comparative table setting out the impact of the directive on consumer protection in each member state and an accompanying note on important issues such as the scope of the directive, which also concerned noble Lords. We are also pleased that, through its work on the consumer markets scoreboard and on cross-border e-commerce, the Commission is making important progress in gathering additional evidence to support its policy-making.
	I shall try to answer some of the points raised. The noble Baroness, Lady Howarth, wanted to probe whether we would support differentiated harmonisation. The UK Government support full harmonisation in principle, but I have already indicated that the directive in its current form does not meet our requirements and we recognise that in some areas full harmonisation may be difficult to achieve. If that is so, we will need to consider alternative solutions such as differentiated harmonisation, but we should aim to find fully harmonised solutions wherever possible. However, we recognise that there are some areas, such as information requirements, where member states need greater flexibility.
	The noble Lord, Lord Kirkwood, asked about Article 42 and inserting criminal penalties into civil law contracts. Article 42 has been brought in from existing directives. We do not think that it is the Commission's intention to apply criminal penalties to breach of contract. We have raised this as an issue and expect some clarification.
	The noble Lord asked whether there would be an impact on Scottish law. Most of the directive covers fields where the law of the UK in general is the same. However, there are areas where there are differences between England and Wales and Scotland. The key point relates to the limitation period for contractual disputes. Five years applies in Scotland and six years in England and Wales. We have consulted Scottish stakeholders and the Scottish Executive; the noble Lord, Lord Kirkwood, will be pleased to learn that we regularly talk with them.
	One of the nuggets of this debate was definitely Donoghue versus Stevenson. It became an even more beautiful nugget when the noble Lord, Lord Lyell, explained to me that it concerned a decomposed snail in a bottle of Stone's ginger wine, which I think is still for sale. I shall treasure my new knowledge of the relevance of Donoghue versus Stevenson.

Lord Woolf: Would the Minister mind if I just drew his attention to the fact that eventually it was found that there was no snail in the bottle?

Lord Young of Norwood Green: It is just like being told that the tooth fairy no longer exists. The noble and learned Lord has destroyed another illusion, but I thank him for the information.
	I think that I have already covered some of the points made by the noble Lord, Lord Borrie. He has already received enough plaudits for his contribution; if we give him any more, he will not get out of the Chamber. We share his concern about the reduction of protection.
	The noble Baroness, Lady Wilcox, spoke about the need for plain English and not having something that becomes almost a lowest common denominator. I believe that I have addressed her point about the full impact assessment.
	The noble Lord, Lord Whitty, feels that we need to start again. I am not sure that we would share that view, but we share his underlying concern about ensuring a real improvement in consumer rights in going down this road. I believe that I have addressed most of the points made by noble Lords. If I have missed any, we will communicate in writing.
	I reiterate the Government's support for the principles that underpin this directive: consumer protection and the internal market. However, it is clear that there is much more work to do to secure a directive that meets both these objectives. We agree with the committee that the directive can be approved during negotiations; it should not be scrapped or rejected out of hand.
	I have just realised that I did not pick up all the points made by the noble Lord, Lord Razzall, who rightly said that we should not be complacent even about our own rights and that there are areas capable of being improved—he gave us numerous examples. I share the view of the noble Lord, Lord Hunt, that we will not get a total media bypass on this issue, because it genuinely creates a lot of interest. My noble friend Lord Whitty will in any case ensure through his work that there will not be a media bypass. Another pleasurable part of the debate was his reminding us about the law of unintended consequences and the cones helpline. What a poignant moment that was. I can assure him that we can retain auto-enrolment. We share his concern about clarity, which is vital.
	The Government are working hard to secure amendments to the directive that will provide the necessary levels of consumer protection and clarity. We are making progress and I remain optimistic that we can secure the necessary changes to achieve an overall high level of consumer protection.
	As we have made clear, the UK Government support full harmonisation of consumer rights where there is evidence that minimum harmonisation and the resulting divergence in laws create barriers to trade and reduce consumer confidence. We will continue to work with the Commission and other member states to find solutions that can be accepted on a full harmonisation basis wherever possible, but we recognise that it may be difficult to achieve this in some areas.
	We will not achieve the potential benefits that the directive can bring simply by insisting that all current UK provisions remain unchanged. All member states must be willing to amend and adapt their rules to achieve workable solutions to ensure that consumers across the whole EU benefit from the directive, but I stress again that it should not be at the expense of the clear protection that already exists.
	Likewise, simply setting the level of consumer protection at the highest possible level will not necessarily benefit consumers or traders. The increased costs to business will simply be passed on to consumers, and increased burdens may force traders to withdraw from some markets, resulting in a reduction in consumer choice. So there is a balance to be struck in consumer rights.
	We have been negotiating this directive in council for a year now. While the progress has been slow, we are making progress towards agreeing solutions on a number of key issues. Following the elections this year, the European Parliament has recently begun its detailed consideration of the proposal. We expect its report in the first half of next year.
	The Government will continue to work with our European partners to improve the text of the directive so that it brings benefits for both consumers and businesses in the UK and across Europe. As we stated in our consumer White Paper published earlier this year, it is our intention to implement the directive through a consumer Bill of rights that will simplify and modernise UK consumer protection legislation so that all key consumer protections are contained in a single piece of legislation, making it easier for traders and enforcers to understand and apply the law and for consumers to understand and assert their rights.
	I could not conclude this debate without once again thanking the noble Baroness, Lady Howarth, and the committee for a really valuable piece of work and an outstanding report.

Baroness Howarth of Breckland: My Lords, I thank all noble Lords who have taken part in a remarkable and in-depth debate. The committee will be reassured that so many other noble Lords in the Chamber have thought about these issues in such depth and continued to fight on behalf of the consumer while remembering that we also have to encourage business.
	I was pleased that the noble Baroness, Lady Young, talked about information and that other noble Lords talked about clarity. Something that we were very concerned about was that many of our consumers do not understand our laws or their rights, even as they stand. For example, I speak as a consumer who discovered that when my garden gates did not work appropriately I could have sent them back within six years. This came as a surprise to me. Many consumers out there do not understand their rights.
	If we make things more complex—and some of the links with contract law would make consumer rights extremely complex—rather than having straightforward regulation, our consumers will find it even more obscure, and Consumer Focus and Which? will have a harder job to make ordinary people aware of their rights. That is why the committee is so concerned that the Government should continue to fight for this directive to be clarified and to have a good basis in relation to consumers in the UK.
	When the Minister began to reply, what he was saying sounded really encouraging, as though the Government were accepting what we were saying, until he got to the last paragraph, which, as I could see, somebody had written for him. Then we had this sort of speak: "Well, it will all be all right when we get there and we have to keep the balance". I say to him that the devil is in the detail and, while he gives these broad reassurances, the right to reject and the issues about mixed contracts and all the things that we have debated this morning remain important to consumers. As we come to an election, I am not sure who will be prepared to give up those rights that the electorate find so extraordinarily valuable. Furthermore, I do not believe that doing so will improve cross-border trade—and I do not think that my committee believes that or that the report reflects that belief. We heard from many in industry that consumer confidence increased trade; that would be true across borders, too. Therefore, if Europe has good consumer law, that is more likely to improve cross-border trade than going down to a minimum of rights.
	This morning we have some visitors from the Commission, who have been listening to the debate. I should say to the noble Baroness, Lady Hooper, that we met a number of people from other jurisdictions when we went through this subject. We were encouraged and helped by them. We were interested that other countries wanted us to keep our present level of consumer protection, because they wanted to get to it themselves.
	In conclusion, I give special thanks to the committee. As a chair, you tend to get the accolades, which I always think is rather unfair. I had an extraordinarily able committee, whose probing, questioning and intelligence meant that we ended up with the report that we have before us. We also had an exceptional special adviser in Professor Geraint Howells, whose work I commend, as did the noble Lord, Lord Borrie. Our staff, the committee clerks and advisers, work to translate the committee's views and the witnesses' evidence into the report.
	The one thing that I may have achieved as the chair is improving the clarity of the English. When I joined the Select Committee, I could understand about as much of what was going on as I did about the snail in the bottle. After my constant grumbling, and that of the noble Lords, Lord Grenfell and Lord Roper, I think that we speak plainer English, even in Select Committee. That is absolutely vital, because it reflects back to what we are saying about consumers and people in our communities. It is not that people are unintelligent but, if we do not explain to them what their rights are, how they can be understood and what they can do to improve their position, they have no hope of doing so.
	Motion agreed.

Rail Freight (EUC Report)

EU Committee Report: on Recast of the First Rail Freight Package

Motion to Take Note

Moved By Lord Freeman
	That this House takes note of the report of the European Union Committee on Recast of the First Rail Freight Package (10th Report, HL Paper 90).

Lord Freeman: My Lords, I shall translate into plain English what this debate is about—the need to strengthen and implement EU law to create an open and competitive rail freight market. After all, the original purpose of what is now the European Union was a common market in which goods and services could move freely and competitively.
	I thank the noble Lord, Lord Faulkner of Worcester, for agreeing to answer this debate. The noble Lord, Lord Young of Norwood Green, in winding up the previous debate, acknowledged that one has to be very careful, because there are always one or two people who know more than you do about a subject. At least two noble Lords who are going to speak know far more than I do about it. I particularly thank the noble Lord, Lord Bradshaw, a member of Sub-Committee B, and the noble Lord, Lord Berkeley, whose knowledge and involvement in furthering an open and competitive rail industry, not just freight but passenger, know no bounds. His activities over the past 30 years in this field deserve congratulations and thanks from us all.
	I thank colleagues on Sub-Committee B, which deals with the internal market, including Professor Chris Nash, who was our special adviser. Indeed, I think that he was an adviser on an earlier report on a similar topic. Thanks, too, to James Whittle, who has moved on to become second clerk to the Select Committee chaired so excellently by the noble Lord, Lord Roper. I am quite certain that James Whittle will go further and higher in his career—I hope, very much, in Parliament.
	We took evidence from 23 different bodies and 14 of them gave oral evidence, an indication of the degree of concern, which I shall shortly describe, about the failings of the first rail freight package, which dates back to 2001. There have been several other attempts in the intervening years between now and then to try to develop a competitive market for rail freight, but the original initiative was eight years ago. We produced our report in June this year, and on the same day as publication had an informal response from the noble Lord, Lord Adonis, who was then Minister of State at the Department of Transport. I pay tribute to the degree of interest and expertise that he has developed over a great number of years in the rail industry. He welcomed the report informally. Then we had a formal response from Sadiq Khan MP, the present Minister of State at the Department of Transport. That came very quickly—in July. If Select Committees of this House are going to produce reports, a timely response from government is helpful to your Lordships and to those who represent us in Brussels, as well as to the Commission, Parliament and Ministers who have either given us evidence or taken an interest in our proceedings. I welcome the very positive response from Mr Sadiq Khan. There were areas of minor disagreement or reserve, which the Minister may wish to outline a little later on, but overall it was a positive response, and I therefore hope that the committee's report has been helpful.
	The first rail freight package was delivered in 2001. It was a directive, and when concluding my remarks I shall come on to why I believe—I think that the committee generally agrees—that regulations are, frankly, sometimes more effective than directives. Although some would argue that it is not perhaps as democratic as a directive, which allows Parliaments to interpret into their own laws its purposes, a regulation says, "This is what should be done to develop a competitive market".
	The purpose of the rail freight package was not only environmental—to take more traffic off the roads and onto the railways—but, more importantly, to try to open up an efficient and competitive market for rail freight moving within the European Union. Obviously, we have looked at the difficulties encountered by UK rail freight operators travelling through the tunnel, then through France to other destinations in Europe, and at the restrictions, problems and headaches that they have encountered. Eight years on, the Commission has finally realised that things have not worked out as well as they should. In June 2008, 24 member states were written to, pointing out where they had not fully complied with the requirements of the first rail freight package. I believe that, today, 21 out of that 24 are still in breach of their duties in implementing the directive. I do not wish to single out any particular countries, but I shall mention four that our rail freight operators seek to pass through: France, Germany, Spain and Belgium. I anticipate that those four are shortly to be subject to infraction proceedings for not implementing the package.
	I appreciate that there has been an economic downturn and consolidation in the industry. Particularly in Germany and France, the larger railway undertakings have been able to snap up, at attractive prices, smaller operators. Once you get that consolidation, competition is therefore obviously under threat. Doubtless, the noble Lords, Lord Berkeley and Lord Bradshaw, and other colleagues, may wish to deal with that issue in greater detail, but for the convenience of your Lordships I shall run through the seven key conclusions that we reached.
	First, we believe that, as in the United Kingdom, the infrastructure—that is, the track—should be under separate management and, indeed, ownership from the train operators. This happens in the United Kingdom, with Network Rail being separate from the passenger and freight train operators. That is important, because you enhance competition if the individual new entrant to a particular new industry is able to deal with a common infrastructure—of track ownership and maintenance—so that there is a level playing field not only for United Kingdom rail freight operators seeking to pass through European countries, but for anyone from the 27 nations.
	Secondly, we believe that the regulators should be independent not only of the track owners and train operators but of Government. Government may appoint regulators, but the regulator—as in the United Kingdom's Office of Rail Regulation—is genuinely able to reach clear, justifiable and economically based decisions. In several European countries the regulator is either part of a government department or, indeed, controlled by the infrastructure under a manager. That cannot be right.
	Thirdly, we believe that there should be a common definition and transparency in calculating the track access charge—that is, the charge that the freight operator pays to travel along the railway lines in an individual country. Those charges are not transparent at present. They vary widely across Europe, and if there could be a common formula for the calculation it would be fairer, and easier, for the freight operators to calculate the costs of moving their goods. Fourthly, we think that all of the freight operators should have open access to what we call rail services, such as terminals, ports and sidings. That is not true at present, and it is a restriction of trade.
	Fifthly, we have argued that, as is the case in the United Kingdom, there should be multi-annual funding contracts from Government to the track managers. In this country, as your Lordships will know, we have a five-year periodic review of those charges, which is a long enough period for the manager of a track not only to calculate the access charges over the longer period but, frankly, to give the freight operators from other countries some degree of confidence when they plan their prices and offer their services. Sixthly, we think that legal pressure should continue through the infraction proceedings. The Commission has a duty to take before the courts the failure of Governments to implement the package.
	Finally, at the same time we think that we have to proceed with a recast—that is, a reformulation—possibly by way of regulation as opposed to directives. We want the Commissioner and his staff to have the courage to say that, in Europe, we have failed over the past eight years—and it will shortly be nine—to have a free and competitive market. It is important for the vitality of the economy of the European Union, and they should get on with the job. I beg to move.

Lord Berkeley: My Lords, it gives me great pleasure to speak in this debate. First, I thank the noble Lord, Lord Freeman, for his very kind words about my activities in rail freight over the past few years. I also want to thank him and his committee for a really major contribution to the debate about rail freight—on the need to restructure, transparency, independent regulation and everything that leads to growth. I declare an interest as chairman of the Rail Freight Group in the UK; I am also this year's president of the European Rail Freight Association, where I had the honour to be asked to give evidence to the committee.
	From my discussions and trips around Europe, I believe that this report has had a great and significant effect. It has been very much welcomed by the industry, not just by the railway undertakings, and particularly the private ones, but by the customers. Of course, it is usually the customers who decide how freight is going to get moved. It is worth recalling that with the structure that we have in the UK to which the noble Lord, Lord Freeman, referred, rail freight has grown by about 60 per cent in this country since privatisation, whereas in France, which the noble Lord also mentioned, it has gone down by 40 per cent, because there is no competition. The recession is affecting us all, and I shall come on to that later, but the key to this report, as noble Lords will not need reminding, is that it was based on evidence.
	I thought that the witnesses' evidence, both written and oral, was extremely strong. I was therefore quite surprised to hear that an incumbent operator in a major continental country had approached their Government, asking, "Would you please tell the British Government that the House of Lords committee report was totally out of order? It said all the wrong things—could you get it cancelled?". I do not think they quite understood the difference between Government and Parliament, or a few other things. Anyway, while I do not know what our Ministers here said, the report is still very much with us. I hope that it stays with us; I know that it will. I also welcome the response from the Secretary of State, in that it was generally supportive of the recommendations, as of course I am.
	I should like to bring out one thing from the infraction proceedings to which the noble Lord, Lord Freeman, referred. There is a useful list of which countries have failed in which regard, and that list is very long. Thirteen member states failed on regulatory independence and scope. I will not go through all the others because it is a five-page document, which is indicative of the extent of failure.
	Sadly, from my discussions around the states, the list of the issues on which the Commission intends to take member states, eventually, to court—which is excellent—is only the tip of a very large iceberg. The problem is that it is not one iceberg but 21, all of different shapes and sizes. Leaving the sea and icebergs aside for a moment, I think noble Lords can understand the difficulty for a train operator of trying to start up in a new member state, with all its particular problems, and then trying to get to the next one where the problems are all different. It is a real nightmare.
	The UK Government have got off pretty lightly on some of these things, I think. We are not one of the 21. However, I am not really convinced that here, good though the structure and everything else are, the infrastructure manager—that is, Network Rail—has anything like enough incentive to reduce costs. The regulator is doing what it believes to be its best, but there is a great deal to be done and Network Rail failed by 4 per cent to reduce its costs. It was supposed to reduce costs by 31 per cent over five years in the period that ended in April, and it was 4 per cent short, which is quite serious, although big bonuses were still given for achieving that.
	Also, we do not do anything like enough to encourage the managers of infrastructure to minimise disruption. Passengers do not like going on buses and freight cannot go on buses. Yes, sometimes you can have diversionary routes. Network Rail scored a real own goal during the Labour Party conference in Brighton. Somebody came up to me at one of the fringe meetings and said, "Do you know that Network Rail has closed both lines to Hastings over the weekend?". There are two completely separate lines to Hastings; surely one could have been kept open and the public told, but no—Network Rail closed both at a time when all our Ministers were in Brighton and heard about it. I cannot say more than that, but there is quite a long way to go.
	Since the report was written and the evidence taken, sadly, the economic situation has got worse in the recession. The market share of rail is holding against road—if not getting better in some cases—but, of course, the volumes are down. This means that there is stronger pressure on all operators. There are financial pressures as well as everything else. There has been an increase in complaints from the European association to the Commission about failures in member states. There are serious failures in even the first railway package issues. For example, in Poland the incumbent has not paid access charges for a year. How can the independent operators compete with somebody who has not paid access charges? The incumbent said that it did not have any money. When I was there I was asked what I would do. I said that I would stop the incumbent operating trains and let the independents do it.
	In Romania—which is, I know, another eastern European country—the incumbent is losing market share to the private sector, which is good for the private sector, but the infrastructure is in an appalling state because, for a reason that is not yet clear, Romania was given €3 billion to invest in the infrastructure when it joined the European Union and has not spent it. We heard recently that in France the Government have announced a very welcome €7 billion package to help rail freight. However, much of it appears to be going to SNCF. Some will be going to RFF, the infrastructure manager. If it goes to one operator, surely, in these days of open access, other operators should be given the chance to compete.
	One of the biggest problems is that of the incumbents buying up small private operators, as the noble Lord, Lord Freeman, referred to. As he said, there will be less choice, but I question how the incumbents find the money to buy up private operators when half of them have their hands out for state aid. It may be for passengers, it may be for infrastructure, but with a lack of transparency, again, it is a serious problem. That is why I very much welcome, in paragraph 84 of the report, the committee's encouragement of the Commission to use more competition law. We have to consider how to define the market when there is a dominant position. Is it a market for rail freight within a member state? Is it on a corridor, such as that between Rotterdam and Italy? Is it for coal or containers?
	The one question that I would ask my noble friend to answer when he responds is whether the Government can press the Commission to produce guidelines or something similar on how it would assess the markets in these different sectors, so that when there is a proposed buy-up of a private company, it could be assessed against whether it was going to cause a dominant position in a particular market. When it comes to the private sectors the Commission tells me that a private operator must make a complaint. I say that, first, it is very difficult to do that and, secondly, it is very expensive and they do not have the money. It would be very good if there were some guidelines from the Commission on doing that.
	Similarly, on state aid, I went to the European Council of Ministers of Transport conference in Leipzig in May. There were three Transport Ministers on the platform, from Italy, France and Poland. I could not resist the opportunity to ask them a question. They had all complained that the railways are broke. I said, "Why don't you sell off your rail freight companies to the private sector? First, they will be able to compete more fairly with the private operators and, secondly, you will get some money to help your infrastructure". I got looks of incomprehension from all three. Finally, the French Minister said, "Yes, but we have a problem getting into Hamburg". I could not go back but I was going to ask him who he meant by "we". Was it la France, was it SNCF, or what? Was it a problem with access to Hamburg port? Anyway, he did not answer. It just shows that there is an awful lot more to do.
	I have talked about independent regulation. Mr Khan's letter seemed to suggest that things will be better when directive 2007/58 comes into force. There is absolutely no evidence of any change at all across Europe since the committee took evidence. Member states are taking no notice. Half of them do not even know what regulation is. I know our Office of Rail Regulation is trying to help those who ask for help. There is a long, long way to go, so we should not take much comfort from that. I believe that the report is absolutely right in pushing for the recast and for taking member states to court if they do not comply. The recast needs strong and independent regulation, and fair and open access to terminals, as the noble Lord, Lord Freeman, said. At the moment, independent operators in Poland sometimes get charged 50 times what the incumbent is not charging itself. Multi-annual contracts are absolutely right. The noble Lord, Lord Freeman, is right about better structure of charging. Twenty years after the fall of communism, the reason for rates being higher in eastern Europe is that in the communist days rail freight subsidised passengers. There was no competition with road.
	It really has to change. The Commission and the whole EU have to support the change. Again, there should be total separation of infrastructure managers from passengers and freight. There may be an argument for requiring separation of passenger freight operators in the absence of proper transparency between them. I have mentioned competition issues and state aids.
	Finally, the committee and the noble Lord, Lord Freeman, mentioned the question of a regulation or a directive. The noble Lord is right to raise it. I believe that the committee is right. On the basis of the failure of member states even to implement the laws of the last 18 years, since 1991, a regulation would be a very good idea. However, it will mean a big battle in Brussels that I hope—indeed, I know—the Government will support.
	At the end of the day, as the noble Lord, Lord Freeman, said, we are trying to create a single market for rail freight—that is the objective; that is what the law says—and we have to finish it somehow. I know that our Government are being very supportive. We have a keen Commission and a slightly reluctant commissioner, although we do not know who will be commissioner next year. We have to ask other member states: do you really want open access and competition for freight or does the single market that we have all dreamt of somehow not apply to the rail freight business?
	I am very grateful to the committee for its report. I congratulate all its members on an excellent publication.

Lord James of Blackheath: My Lords, I always feel that anybody speaking in the gap should start with an apology for interfering with the orderly flow of debate, but as a member of Sub-Committee B of the European Union Committee there is one point to which I should like to draw attention, which walks through the report without actually disclosing itself fully. I wholly agree with what the noble Lord, Lord Berkeley, said about regulation, but we need to recognise the comment made by Brian Simpson, quoted at paragraph 45 of the report, and that of Network Rail, that the present European Union regulators, in the absence of an EU, pan-European regulator, represent an,
	"unbalanced group at the moment".
	One might have said the same about the England cricket team at the outset of the summer but they still won the Ashes. One hopes very much that these regulators will similarly rise to the occasion. They do, however, have a very big task before them, because the whole of this issue was encapsulated beautifully by a member of Sub-Committee B, who said that rail freight in Europe is drinking in the last chance saloon. That is very much the way that it is at the moment, as we see it.
	If we are to have a successful European rail freight system, it has to start by becoming thoroughly competitive, which means having the right access, and the right costs of access, on a pan-European basis to make it work. But you have to acquire that access at a national level and it will involve participating and interfering in the national access of other states as well. That will not only be a price issue but will also become a safety issue because the access may impact adversely on the maintenance and service requirements of other states. Very careful and insightful regulation will be needed to make it work. At present, in the absence of a pan-European regulator, it is very hard to see how there is going to be an umpire capable of taking the difficult decisions to resolve those problems. Just as we won the Ashes with an unbalanced group, I hope very much that the word "premature", which appears in the final conclusions about pan-European regulation, is not read as "permanent".

Lord Bradshaw: My Lords, I thank the noble Lord, Lord Freeman, for his constructive and encouraging chairmanship of the sub-committee. I also thank the staff who greatly helped us.
	My first concern involves the independence of a regulator in this regard. It is all based on the fact that the statement of funds available for the railway (SoFA) is safeguarded so that when the regulator makes his settlement for Network Rail we know that those funds will be available for five years. Otherwise, we shall get back on the old treadmill of annual funding or inadequate funding, from which the railways have suffered for so long. I hope that the noble Baroness, Lady Hanham, who will speak after me, will say whether a Conservative Government would retain the statement of funds available, should we have a change of government.
	Further to what the noble Lord, Lord Freeman, said about the report, I refer to the importance of access to terminals, services and other ancillaries, because you can grant free access to the railway but you can effectively block it by making it impossible to get locomotives or fuel, or to get to the ports and to the people.
	The noble Lord, Lord Berkeley, referred to infractions. I have a list of them which I do not intend to read out. However, I shall refer to the government response, signed by the Minister, Sadiq Khan. On page 2 of the response the Government rather rejoice at the fact that infraction proceedings are not to be taken against the UK. We do not have insufficient incentives for infrastructure managers to reduce infrastructure costs and access charges—or do we?—and perhaps we do not suffer from the absence of a performance regime to encourage infrastructure managers to minimise disruption. This is an absolute nonsense. The cost of maintaining the railway in this country is wickedly high. I have listened to the management of Network Rail repeat year after year that we are going to have a 24/7 railway, alternative routes will not be blocked, train operators will find it very much easier to operate their trains and passengers will find the railways much improved. What action, if any, do the Government propose to take to curb the monopolistic and arrogant attitude of Network Rail, or is this publicly funded body out of control? I should be interested to hear from the noble Baroness, Lady Hanham, what ideas the Conservatives have for bringing this monster under control.
	Competition is a very interesting subject. I am not a lawyer and certainly not a competition lawyer but I know that competition depends on market definition; namely, the market that you are talking about. This concept is very important as regards the bus industry where you just draw a line around a town or a group of routes, but I submit that it is wrong to talk about the railway in isolation in terms of international traffic as a huge proportion of the traffic, and probably an even greater proportion in the future, is conveyed in competition with sea transport, inland waterways and, more particularly, road transport. I propose to spend some time discussing that subject as other modes must enter into the picture.
	What progress is being made in this country in making foreign lorries pay to use our roads? It is not a case of my being against foreigners, but in a fair system everybody should pay to use the facilities. The Minister is probably as aware as I that Germany has a system of lorry charging, which works and discriminates in favour of the most environmentally friendly vehicles. I believe that from a technical point of view it would be possible to introduce it into this country. It does not require a lot of beacons and is very simple to operate. However, we are told repeatedly by the department that it is not appropriate to introduce lorry charging at present. I would like to know why that is the case.
	I would also like to know the department's views on the House of Commons Transport Committee report, The Enforcement Activities of the Vehicle and Operator Services Agency, (VOSA), as I have not seen them. International vehicles represent a substantial proportion of vehicles stopped for abusing drivers' hours regulations, overloading and being in a poor mechanical condition.
	An article in Freight magazine states:
	"Some 11,000 fixed penalty notices have been issued for a range of traffic offences since VOSA started issuing graduated fixed penalties on 28 May. Over 800 vehicles have been immobilised and more than half a million pounds have already been collected",
	in fines. That is all very well and good, except that more than 60 per cent of penalty notices were issued to foreign-registered vehicles from the European Community. Therefore, probably most railway operators obey the law while a large number of lorries on our roads operated from abroad are disobeying the law. I ask the Minister: what sort of answer is the House of Commons Select Committee getting?
	We have a rising number of non-compliant vehicles, yet we have in place a graduated fixed penalty scheme, a financial penalty deposit scheme—which means that if you have no money you must deposit your credit card, passport or something—and an immobilisation scheme whereby the lorry may be stopped. However, the report states that the fines are small and recommends that they be increased. My charge to the Government is that the amount of money that people make out of breaking the law is huge. To fine them £60 is small change and will do nothing to correct the abuse, unless the system is considerably strengthened. The Government should look very hard at the exchange of information between European partners about breaches of the regulations which, as far as I know, is being blocked due to the provisions of data protection legislation. That is a hindrance, particularly to Her Majesty's Revenue and Customs in collecting money and building up intelligence about people who are breaking the law. In previous Parliamentary Answers I have been told that the same drivers and firms are repeatedly being caught—yet the penalties are regarded by such people as a part of the expenses of running a business.
	Has the Minister given any thought to the paragraph in the report about access to port premises where road vehicles enter the UK? Many of these abusers could be stopped at the point of entry and should not be allowed on our roads if they are unroadworthy, if the driver has not had sufficient rest or if the vehicles are in bad mechanical condition. Ministers should not shy away from legislative action. I know that the ports do not like it, because it delays unloading ships, but it is not safe to allow such vehicles onto our roads.
	On the question of the heavy lorry, I refer to an article in the Sunday Times which I do not usually read. I am sure that my reservations about half-truths, sleaze and sensationalism of the press are shared by other noble Lords. However, that newspaper stated:
	"Brussels to override Britain's ban on mega-lorries".
	I can assure noble Lords that if 60-ton lorries are introduced throughout Europe, rail freight will take a nosedive in volumes. The article names a person—John Berry, a former civil servant working in Brussels—who is apparently a great advocate on whether we should have these lorries, which are 21 feet longer than any existing lorry on our roads, and which are almost certain to cause more accidents. Is that person being paid by Her Majesty's Government in any way? If he is, is he advocating a policy that we should have these lorries? The noble Baroness, Lady Hanham, may care to comment on whether the Conservative Party supports the introduction of 60-ton lorries. If they do, that will be very bad for the environment and for rail freight.
	I witnessed two incidents last week of 44-ton lorries being stopped in the centre of the historic town in which I live in Oxfordshire. They stopped all the traffic, the drivers were obviously lost, and they had passed weight-limit signs of 7.5 tons—which in any case relate only to access. If drivers cannot read our road signs they are either not properly trained or our road signs are not big enough to read. Road signs, whether they are protecting railway level crossings or our small towns, should be observed by anyone who drives on our roads. If they are unable to observe them, they should not drive here.
	I am sorry that my remarks have been directed mainly at the road sector, but it is a huge part of the freight market. What costs have been incurred by central and local government in introducing 44-ton lorries to this country? It is not a trivial sum; a lot of money has been spent on roads, bridges and the roadworks of which we are all victims.
	I should very much like to hear the Minister's answers. Perhaps he may write to the committee if he does not have them to hand.

Baroness Hanham: My Lords, I thank my noble friend Lord Freeman for initiating this debate and for chairing the European Union sub-committee. This report is on a subject that will keep on going for some time. I am disappointed in the limited number of speakers, because a lot of powerful people sat on that committee and I am sure that they would have had much to add to this debate. The noble Lords who have spoken played a significant part in the committee, including my noble friends Lord Freeman and Lord James, and the noble Lord, Lord Bradshaw. The noble Lord, Lord Berkeley, submitted a great deal of evidence to the committee, and that is demonstrated in the notes on proceedings.
	It is not my job, as opposition spokesperson, to answer the questions posed by the noble Lord, Lord Bradshaw. First, he tempts me to make a commitment on spending, but I could not do that even if I were standing here in the role of shadow Minister for Transport. Secondly, as he admitted, his speech had nothing to do with the report we are debating today—as he was a member of the committee, that is slightly surprising—but has everything to do with road transport. While we acknowledge that that has a role to play in freight, it is not what the report is about.
	We greatly welcome the report and appreciate the hard work that the committee has done to compile one that is thorough and well researched. However, it is clear from the report that there are problems on a European-wide basis—the noble Lord, Lord Berkeley, touched on those in particular—that need to be addressed, hence the need for the recast of the original proposals on the rail freight package to open up the railways across Europe to more freight trains.
	We have long supported the wider objectives of the first rail package to tip the balance of freight carriage from roads to rail and to lower the environmental impact of the vital movement of freight across countries and borders. That is especially so as in recent years our roads have become more and more congested, with motorways representing 1 per cent of road infrastructure but carrying 40 per cent of traffic. We want to see rail freight become an increasingly attractive alternative to road haulage.
	That would help reach the commitment set out in the Government's climate change legislation to cut carbon emissions by a quarter by 2020 and by a half by 2050. Rail freight can help reach this figure as every tonne of freight carried by rail produces at least 80 per cent less carbon dioxide than by road. Therefore, more rail freight would help to tackle congestion. The Freight Transport Association estimates that one freight train can take 50 lorries off our roads, yet in 2008-09 there were 316,684 freight train movements, which was a 4.7 per cent decrease on the previous year's total. In 2008-09 more than 20 billion net tonne kilometres were moved by freight train. But that was another decrease at 2.6 per cent compared with 2007-08. Therefore, despite what the noble Lord, Lord Berkeley, said, this is the second consecutive year that the amount has fallen, meaning that it is currently at one of its lowest levels.
	So the aim must be to tempt freight from the roads and on to trains. But if this is to happen, significant improvements are going to have to be made. There are clearly serious infrastructure failures, congestion problems and efficiency issues that need to be addressed. However, the proposal for the recast of the first package comes at a time when the second and third railway packages have yet to be fully implemented. Deutsche Bahn has warned that implementing this latest remodelling could delay other initiatives by two years. So my first question to the Minister is: what assurances have the Government been given that the recast will not stagnate progress rather than facilitate it?
	While attempting a simplification of the rules of the original package, the recast is, none the less, largely a restatement of the Commission's original intentions. Whatever rules and regulations this legislation introduces, it cannot disguise the reluctance of Governments and the agencies that form the rail freight industry to co-operate and ensure they are implemented. What will the Government do to help foster better collaboration among all those concerned, not only in this country but across those which are meant to be co-operating to ensure a relatively smooth passage of freight across the continent?
	For a measure so concerned with fair practice and transparency, little thought appears to have been given to how it might be supported by competition law and other related legislation. Do the Government agree that such consideration would lend more weight to this package?
	I am sure that there is little disagreement among us that the main issue is that rail freight is increased and that the processes which would make that possible are fair and fully understood by all those involved in this sensible policy. We are not sure that the current practice in the United Kingdom alone, never mind in other EU countries, bears this out. The problem is that there is not enough capacity on rail. The amount of freight able to be moved during the day in this country in particular is limited by the encouragement to people to use the train rather than to travel by air or car, so there are more passenger trains. That means that there is not enough spare capacity. In the evenings and at weekends, rail links are suspended or reduced because of repairs and refurbishment.
	Building high-speed rail lines would have a number of benefits for the freight sector, not least by freeing up capacity for freight on the existing network and reducing traffic congestion by taking lorries off the roads. I will ask the Minister a further question. In the short and long term, what plans are the Government putting in place to prioritise freight movements on UK lines?
	The report suggests that it would be best to separate operation managers and operating companies for both train and track. While we agree that in a privatised industry separation of function is important, it is as important to create an environment in which the two can work together. We must end the culture of train operators blaming Network Rail in this country and vice versa, and promote easier working relationships between the two agencies. What action are the Government taking to ensure that there is co-operation between the rail and freight operators, and to strengthen and extend the duties imposed on Network Rail to keep them properly informed on matters relevant to the efficient running of services?
	We agree with the Government and the committee that there should not be an EU-wide regulator, as this would take away too much power from individual nations. The last thing that the Office of Rail Regulation needs is for power to be taken away from it. If anything, it needs more powers to do its job effectively. Does the Minister believe that the Rail Regulator currently possesses the necessary powers to perform its job effectively and to have a stronger say on the governance of Network Rail?
	Finally, will the Minister tell the House what the infraction was that made the United Kingdom one of the countries that infringed the first rail package? Having told us what it was, will the Minister assure us that the infraction has been rectified—or, if it has not, what problems lie behind it? I thank the committee again for an interesting and influential report.

Lord Faulkner of Worcester: My Lords, this has been a small but perfectly formed debate. I warmly congratulate everyone who has taken part in it. I particularly congratulate the noble Lord, Lord Freeman, on presenting the EU Committee report with such clarity and enthusiasm. He said that there was scarcely any difference between the conclusions of the committee and the Government's position. I have been hunting and have found just one, to which I will refer later in my speech.
	I commend all the members of Sub-Committee B who carried out the inquiry and thank those who gave evidence. Some of it was of the highest quality. I am pleased to echo the noble Lord, Lord Bradshaw, and my noble friend Lord Berkeley in congratulating the committee. I also thank the noble Lord, Lord Freeman, for his acknowledgement of the speedy response of the Government. As he said, my noble friend Lord Adonis gave an almost instantaneous reply of warm welcome, which was followed by the Government's official response less than two months from the date of publication. I do not know if that is a record, but it is not a bad response.
	I will start by putting the freight industry in Britain into context and pick up on the point made by my noble friend Lord Berkeley about rail freight volumes. He said that they had grown by 60 per cent since privatisation. The figure that I have is 59 per cent, but I will not quibble. The Government agree with him that one underlying reason for the growth is that we have one of the most liberalised market structures for rail freight in the EU. This growth is projected to continue both within Great Britain and on our international through services via the Channel Tunnel.
	Developments in the Channel Tunnel have been particularly encouraging. New operators have entered the market and launched new services, including the first for a number of years to haul temperature-controlled produce from Italy and Spain to the UK. The opportunities for long-distance rail freight services through the Channel Tunnel will be further enhanced once locomotive modifications have been completed that will allow conventional European-gauge freight services to run on the Channel Tunnel Rail Link HS1 route. That is one of the answers that the noble Baroness, Lady Hanham, was seeking. This will be good for the railway business and good for the environment.
	Again, I warmly welcome the Conservative Party's commitment to support High Speed Two on a non-partisan basis. There is very little difference between the two parties on the desirability of building High Speed Two and we hope to have Conservative support when the feasibility study is presented before Christmas. One of the components being carried out is consideration of the impacts of released capacity on the existing network that would be created by a new high-speed railway. There is the potential for some current long-distance express services to transfer to the new line, freeing up existing capacity for new rail freight services on routes which are presently congested and also providing the opportunity for new regional and local services.
	The Commission's aim of encouraging the establishment of an efficient, well integrated and sustainable rail freight market is therefore broadly similar to our government policy. Like the noble Baroness, we believe that there are clear gains from increasing rail freight.
	The legislation contained in the first railway package is crucial for Europe. It was intended to lay the foundation for the opening of the European rail market. We support the Commission's view that, in reality, the package may have started this process but to date has not fully achieved its declared objective of market opening. In 2006, the Commission published a report which concluded that, although member states had formally transposed the rail access directives in national law, a number of important provisions had not been implemented effectively and correctly. A further Commission report from 2007 found that, although competition had increased, a genuine European rail transport market had not yet been created and that a number of entry barriers and other inefficiencies remained.
	On 26 June 2008, the Commission wrote to all but one of the 25 member states, the exception being the Netherlands, alleging varying degrees of failure to transpose the first railway package adequately into national law. I should emphasise that it wrote to member states with a rail system, because not every member state has a rail system. There are not many railways in Cyprus or Malta, for example. As the noble Baroness correctly observed, the UK received a letter of formal notice from the Commission for alleged non-conformity with the first railway package. I am pleased to tell the House that the alleged infringement was based on a misunderstanding and concerned the time taken by the regulator to approve track access agreements and to hear appeals. In our reply to the Commission of 8 August 2008, the Government stated their belief that our procedures were fully consistent with Directive 2001/14/EC. From subsequent informal meetings with the Commission, we understand that it is content with the UK's response and that no further action on this point will be required.
	On 8 October 2009, the Commission sent reasoned opinions to 21 member states regarding their failure properly to implement the first railway package. The Commission believes that important issues still remain to be solved for opening up the railway markets to competition in a large number of member states—as noble Lords indicated in the debate, 21 of them. The noble Lord, Lord Freeman, particularly mentioned France, Belgium, Spain and Germany. Happily, this time, the UK was among the six member states which did not receive such a letter.
	In the reasoned opinions, the Commission highlighted shortcomings such as: the lack of independence of the infrastructure manager in relation to railway operators; insufficient implementation of the directive's provisions on track access charging, such as the absence of a performance regime to improve the performance of the railway network; the lack of incentives for the infrastructure manager to reduce costs and charges, and of tariff systems based on the direct costs of rail services; and the failure to set up an independent regulatory body with the necessary powers to remedy competition problems in the railway sector.
	The Government therefore fully support the Commission in its efforts to make the international rail freight market more attractive and competitive. As your Lordships' committee recommended, we also endorse the Commission's dual-track strategy of achieving this objective by ensuring the proper and comprehensive transposition by member states of existing legislation and by reviewing the first railway package with the overall aim of clarifying and strengthening the legislative framework.
	With regard to the Commission's imminent review of the first railway package, there is evidence that the separation of infrastructure management and train operations, as practised by a number of member states in everyday operational situations, has not achieved the desired intention of ensuring transparent, equitable and non-discriminatory access to rail infrastructure for non-incumbent, independent operators. Any recast of the first railway package needs to address that lack of separation to create what is probably the most important pre-condition to allow competition to take place under transparent and non-discriminatory conditions. The Government, therefore, agree with the committee's recommendation, mentioned by the noble Lord, Lord Freeman, that the Commission should use the recast to ensure that infrastructure managers treat all rail freight and passenger operators fairly. We believe that this is best achieved by the full separation of rail infrastructure managers from railway undertakings. That will help to ensure fair treatment for freight customers and passengers.
	The Government also agree with the committee that more detailed provisions about the powers and remits of regulatory bodies are needed. We believe that national regulatory bodies should be given the necessary powers, independence, funding and resources to undertake their roles in a manner which is consistent with the spirit of the first railway package. This is how we have configured the regulatory system in the UK. However, in many European member states, as noble Lords have indicated in this debate, rail regulators seem to lack the competences, the resources and the necessary independence from Government to be effective local enforcers of European rail legislation. The recast of the first railway package needs to address this aspect of the regulatory approach across Europe. National regulators need to be empowered to act as effective national enforcement bodies of both the letter and the spirit of the first railway package.
	As the noble Lords are aware, the Commission's proposal for a regulation concerning a European rail network for competitive freight has been agreed at Council and will now go to the European Parliament for Second Reading and possible adoption. The proposal requires that regulatory bodies co-operate with each other and with infrastructure managers on cross-border issues. The Government welcome this development and see that as improving on the current requirements of the first railway package for both regulatory bodies and infrastructure managers.
	The EU committee also recommends that the recast should include a requirement that regulatory bodies should be independent of Government. The Commission has already sought to address the issue of independence by means of Article 2.5 of directive 2007/58/EC which amends directive 2001/14/EC. The directive requires that,
	"the Regulatory Body shall furthermore be functionally independent from any competent authority involved in the award of a public service contract".
	Directive 2007/58/EC is part of the third rail package and had a transposition deadline of 3 June 2009, so member states should have now implemented this requirement. However, it may be too early for the Commission to say what impact this provision has had on the independence of regulatory bodies throughout the EU, although it is a step in the right direction. In essence, however, we agree that regulatory bodies should be independent of Government, as is already the case in the UK.
	The committee recommends that the Commission should not propose establishing an EU-level regulator. The Government agree with that recommendation. That point was touched on by the noble Lord, Lord James of Blackheath, in his intervention. We believe that increased co-operation between national regulatory bodies, with the necessary powers, independence, funding and resources, should be able to oversee cross-border services in an effective way. It would be undesirable to have an EU-wide single regulator.
	The committee recommended that the Commission include in the recast mandatory definitions of which costs can and cannot be included in infrastructure charges. The Government believe that the principles of calculating track access charges differ widely from member state to member state. There is also evidence that in some member states the setting of infrastructure charges lacks transparency and consistency, which is likely to hinder the development of competition in the European rail freight and passenger market. We agree that the principles and methods for the calculation of infrastructure charges should be clarified and made more transparent and consistent.
	The committee also recommends that the recast include a requirement for member states to agree multi-annual contracts with their infrastructure managers. The Government are aware that in some member states funding remains exposed to the vagaries of annual government budgeting. I do not blame the noble Baroness for not responding to the challenge posed to her by the noble Lord, Lord Bradshaw; I should have been astonished if she had. That leads to unforeseen and sudden shortfalls of funds available for infrastructure management. The consequence is that infrastructure managers try to recoup funding shortfalls with increased track access charges in order to balance expenditure and income. In some cases, that makes the running of rail freight operations, which often suffer from low margins, and rail passenger services prohibitively expensive. The Government therefore believe that funding of infrastructure managers should be placed on a more reliable and predictable footing. The UK system of the five-year periodic review creates the necessary continuity and stability of funding. We think that that is an essential pre-condition for sound and efficient infrastructure management.
	Regarding rail-related services, the committee recommends that member states should be required to give regulatory bodies the power to act in this area. From a UK perspective, the Office of Rail Regulation has those powers already through measures introduced through the first railway package and transposed into UK legislation which has extended the opportunities for freight users to seek access to other operators' terminals and those terminals previously exempt from regulation. In some other member states, there is anecdotal evidence that access to tracks, terminals, ports and services remains a problem for non-incumbent, independent operators. In particular, operators are having difficulty obtaining evidence that the charges which are quoted for access to tracks, facilities and supply of services reflect the cost of providing the service, calculated on the basis of actual use. We therefore support that recommendation.
	The committee recommends that the Commission explore the potential for the package to be complemented by the use of competition laws—a point referred to by my noble friend Lord Berkeley. The Government agree that the Commission should investigate the possibility of making use of competition laws if and where that is appropriate, but hope that proper enforcement and the recast of the first railway package will ultimately rectify the current lack of real competition of rail freight and rail passenger services within the UK.
	Finally, the committee recommended that the Commission consider recasting some of the railway package's provisions into a regulation, which would be directly enforceable in all member states, rather than using a directive, which requires transposition into national laws. That is the only area where the Government take issue with the Commission and do not agree. We understand that the Commission is already considering that option. However, recasting some of the provisions of the first railway package by means of a regulation would be scrutinised more closely during negotiations and could therefore result in watered-down legislation.
	To summarise the situation in the UK, the Government believe that the key principles of the first railway package have been transposed properly and comprehensively. There is a clear functional and structural separation of infrastructure management from train operations. Capacity allocation and charging work in a transparent and non-discriminatory manner, permitting all operators equitable access to the network, and we have a functioning regulatory system with a well resourced, independent regulator, the Office of Rail Regulation, which has comprehensive powers of economic and safety regulation.
	If I may, I shall now try to answer points made by individual speakers in the debate. My noble friend Lord Berkeley asked about guidelines issued by the Commission. We would welcome the Commission providing clear guidance on a number of points when recasting the first railway package, such as which elements of cost can be included in track access charges and which cannot, and the general conditions of access to the infrastructure. The Government will engage, and indeed already are engaging, with the Commission on these and other ideas that need to be clarified.
	The noble Lord, Lord Bradshaw, asked a succession of questions that related not directly to the report but to rail freight. There were some questions on infrastructure maintenance costs and the operations of Network Rail. Decisions on the efficiency of Network Rail's operations and how to improve them fall to the independent regulator, the Office of Rail Regulation, under the five-year funding settlement that has recently been implemented.
	The ORR continues to task Network Rail with delivering further challenging efficiency targets on the operation, maintenance and renewal of the national infrastructure. I certainly endorse the noble Lord's comment that the quicker we can move to the seven-day railway, to which he referred, the better. We are maintaining pressure on the rail industry to improve engineering-work planning procedures to reflect better the needs of passengers and freight passengers. The ORR's requirements on Network Rail for control period 4—2009 to 2014—to reduce the disruption to passenger services by a third by 2014 are a good start, but we want rail improvements to come into effect as soon as possible.
	The noble Lord, Lord Bradshaw, also asked about the Government's progress in making foreign lorries pay for road use in the UK. Following the conclusion of the freight data feasibility study in 2008, the Government decided against a vignette scheme at this time due to what were seen as the limited benefits that could be achieved when compared with the costs. It was decided that greater benefits are achievable through other measures, such as enforcement. The Government are undertaking a foreign vehicle data survey to refresh data on foreign vehicle movements throughout the UK and to provide up-to-date evidence and this is expected to conclude this year.

Lord Bradshaw: My Lords, I am slightly at a loss to know how better enforcement has anything to do with the cost of using the highway. They are two separate issues; one is about obeying the law, and one is about paying for a service.

Lord Faulkner of Worcester: My Lords, the Government take the view that enforcement and better knowledge of foreign lorries are the priorities for the immediate term. The costs of an alternative system in the short term are seen to be very high.
	The noble Lord, Lord Bradshaw, also asked whether the regulations are being properly enforced. We have made an additional £24 million available to the Vehicle and Operator Services Agency over a three-year period from 2008 to enable it to carry out more enforcement checks on HGVs on international journeys. A high proportion of these vehicles are foreign-registered.
	In April 2009, we introduced a graduated penalty and fixed deposit scheme. This empowers both the police and VOSA to demand on-the-spot payment of a financial deposit from non-resident drivers, including heavy goods vehicle drivers, who commit road traffic offences. Offenders are given the option to go to court and to have their deposit returned to them if they are subsequently cleared of the offence. In practice, almost no foreign drivers elect to go to court, and well over £700,000 has been collected in deposits since April.
	Powers to immobilise vehicles were introduced at the same time. The police and VOSA can now fix immobilisation devices to heavy goods vehicles that prevent them from being moved until the safety defect or overloading has been corrected or a driver has taken a sufficient rest period under drivers hours' rules. Immobilisation devices are also fixed if a driver cannot immediately pay the required fixed penalty deposit and removed only when the money is forthcoming.
	The noble Lord, Lord Bradshaw, referred to the report of the Transport Select Committee in another place on VOSA. The report is now being finalised and will be with the House of Commons shortly. It would be discourteous of me, speaking from this Dispatch Box, to anticipate a report which is going to the other place.
	He also asked about the risk of allowing 60 tonne lorries on our roads. I would point him to a statement made by the Secretary of State on 3 June 2008, which informed the House of Commons that large, 25.25 metre longer and heavier goods vehicles, which are of a 60 tonne double trailer combination, would not be allowed on United Kingdom roads for the foreseeable future. That decision was based on the result of a study commissioned by the Department for Transport, which highlighted a number of issues that make implementation of LHVs in the UK impractical either on a permanent or a trial basis. The issues that were influential in the Government's decision are the risk of increased CO2 omissions and other drawbacks, including the modal shift from rail to road, a point to which the noble Baroness referred in her speech; the management of the road network; the substantial investment which will be needed for the infrastructure; uncertainty about their efficiency; new safety risks; and the fact that tougher safety or manoeuvrability standards cannot be mandated because of EU trade rules.
	The noble Lord, Lord Bradshaw, asked about an individual who is working at the Commission in Brussels. My understanding is that this individual is an official within the DG TREN unit at the European Commission. It would not be appropriate for me to comment on for whom he speaks or what views he may or may not hold. All I would do is counsel the noble Lord not to believe everything that he reads in the newspapers.
	I think that I have covered most of the points made in this debate. If I have not, I will write. I am conscious that I might have missed one or two of the points made by the noble Baroness. If I have not covered her points, I will write.
	I should like to reiterate the Government's strongly held belief that, in order for international rail freight to become a more attractive and competitive alternative and to enjoy a level playing field for passenger operators, it is imperative for the Commission to pursue with determination and vigour two indispensable objectives: namely, proper and comprehensive transposition by member states of existing and any future legislation, and a review of existing legislation, such as the first railway package, with the overall aim of clarifying and strengthening the legislative framework. A truly open European rail market will be achieved only when both those conditions have been met.
	I conclude as I started by congratulating the committee on an excellent report with which the Government are in almost total agreement and the noble Lord, Lord Freeman, on the way in which he introduced it.

Lord Freeman: My Lords, I thank the Minister for that comprehensive and most welcome response. It is not usual to thank officials, but I should be grateful in this particular instance if the Minister could communicate with Mr Kahn, the Minister of State at the Department for Transport, asking him, through the Permanent Secretary, to thank transport officials not only for the speed of response but also for its clarity not just in terms of this report, but in the pattern that has developed. We should thank them. The noble Lord, myself and other colleagues, having served as Ministers, realise that 99 per cent of the work is done by officials and that in some cases the Minister is just the delivery mechanism.
	I thank my noble friend Lady Hanham for her very helpful contribution to the debate. Let us hope that she will have the opportunity in due course as a Minister of actually delivering an official response, not only in this department but perhaps in others. Indeed, we seem to have a tripartisan approach from the three Front Benches which is most welcome and perhaps unusual in debates in this House. I thank in particular the noble Lord, Lord Bradshaw. He clearly argued the case for an early inquiry into road transport, and I shall support him as and when he puts that request to the Select Committee.
	Finally, with the agreement of the chairman of the main Select Committee, the noble Lord, Lord Roper, I hope to make a rather unusual request of the Minister. So that we can follow through with this debate, will he ensure that the Commissioner in Brussels receives a copy of Hansard with the Minister's response translated into Italian, with no redactions and with exclamation marks left in?
	Motion agreed.

House adjourned at 1.16 pm.